AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 17, 2003
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 AGGREGATE FEE
PRICE OFFERING PRICE*
PER UNIT
- ------------------------------------------------------------------------------------------------------------------------
Class A2 Mortgage Backed Floating Rate Notes.... $750,000,000 100% $750,000,000 $69,000
- ------------------------------------------------------------------------------------------------------------------------
Class B1 Mortgage Backed Floating Rate Notes.... $25,000,000 100% $25,000,000 $2,300
- ------------------------------------------------------------------------------------------------------------------------
Total Mortgage Backed Floating Rate Notes....... $775,000,000 -- $775,000,000 $71,300
========================================================================================================================
* Estimated for the purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any State where the offer is not permitted.
SUBJECT TO COMPLETION DATED JANUARY 17, 2003
INTERSTAR MILLENNIUM SERIES 2003-1G TRUST
US$[750,000,000] CLASS A2 MORTGAGE BACKED FLOATING RATE NOTES
US$[25,000,000] CLASS B1 MORTGAGE BACKED FLOATING RATE NOTES
[GRAPHIC OMITTED]
INTERSTAR SECURITISATION MANAGEMENT PTY LIMITED
(ACN 100 346 898)
TRUST MANAGER
PERPETUAL TRUSTEES VICTORIA LIMITED
(ABN 47 004 027 258)
ISSUER TRUSTEE
The Class A2 notes and the Class B1 notes, collectively the US$ notes,
will be collateralized by a pool of housing loans secured by properties located
in Australia. The Interstar Millennium Series 2003-1G Trust will be governed by
the laws of New South Wales, Australia.
The US$ notes are not deposits and neither the US$ notes nor the
underlying housing loans are insured or guaranteed by any governmental agency or
instrumentality. The US$ notes represent obligations of Perpetual Trustees
Victoria Limited solely in its capacity as trustee of the Interstar Millennium
Series 2003-1G 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 US$ NOTES INVOLVES RISKS - SEE "RISK FACTORS" ON PAGE 18.
INITIAL UNDERWRITING
PRINCIPAL INITIAL PRICE TO DISCOUNTS AND PROCEEDS TO
BALANCE INTEREST RATE PUBLIC COMMISSIONS* ISSUER TRUSTEE*`
-------------- --------------- ------------------- ---------------------- ----------------------
Class A2 notes US$750,000,000 LIBOR+[_______]% US$[______] or[___]% US$[________] or [___]% US$[________] or [___]%
Class B1 notes US$25,000,000 LIBOR+[_______]% US$[______] or[___]% US$[________] or [___]% US$[________] or [___]%
Applications have been made to have the US$ notes listed on the
Australian Stock Exchange.
Delivery of the US$ notes in book-entry form through The Depository
Trust Company, Clearstream, Luxembourg and the Euroclear System will be made on
or about ___________.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the US$ notes or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
BARCLAYS CAPITAL
[________________] [________________]
The date of this prospectus is [_____________], 2003
- ------------------------------------------------------------------------------
* 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 .......................................................................1
Parties to the Transaction.................................................1
Structural Diagram.........................................................3
Summary of the Notes.......................................................4
Structural Overview........................................................6
Credit Enhancements........................................................6
Liquidity Enhancement......................................................8
Redraws ...................................................................8
Hedging Arrangements.......................................................9
Optional Redemption........................................................9
Prefunding................................................................10
The Housing Loan Pool.....................................................11
Withholding Tax...........................................................12
U.S. Tax Status...........................................................12
Australian Tax Status.....................................................12
Legal Investment..........................................................12
ERISA Considerations......................................................12
Book-Entry Registration...................................................12
Collections...............................................................13
Interest on the Notes.....................................................13
Principal on the Notes....................................................14
Allocation of Cash Flows..................................................14
DISTRIBUTION OF AVAILABLE INCOME ON EACH MONTHLY PAYMENT DATE.................15
DISTRIBUTION OF MORTGAGE PRINCIPAL REPAYMENTS, LIQUID AUTHORIZED INVESTMENTS
AND RECOVERY AMOUNTS ON EACH MONTHLY PAYMENT DATE.........................17
RISK FACTORS..................................................................18
CAPITALIZED TERMS.............................................................30
U.S. DOLLAR PRESENTATION......................................................30
-i-
TABLE OF CONTENTS
(continued)
PAGE
THE ISSUER TRUSTEE, THE TRUST MANAGER AND THE SERVICER........................31
The Issuer Trustee........................................................31
The Trust Manager.........................................................31
The Servicer..............................................................32
The Sellers...............................................................35
The Backup Servicers......................................................36
DESCRIPTION OF THE TRUST......................................................37
Interstar Millennium Trusts Securitization Program........................37
Interstar Millennium Series 2003-1G Trust.................................37
DESCRIPTION OF THE ASSETS OF THE TRUST........................................38
Assets of the Trust.......................................................38
The Housing Loans.........................................................38
Acquisition of Housing Loans after the Closing Date.......................39
Transfer and Assignment of the Housing Loans..............................39
Representations, Warranties and Eligibility Criteria......................40
Breach of Representations and Warranties..................................44
Other Features of the Housing Loans.......................................45
Details of the Housing Loan Pool..........................................45
HOUSING LOAN INFORMATION......................................................46
Analysis of the Housing Loan Pool.........................................46
Housing Loans by Occupancy................................................46
Housing Loans by LVR (Loan-to-Value Ratio)................................47
Housing Loans by Product Types............................................47
Housing Loans by Geographic Distribution..................................48
Housing Loans by Loan Size................................................48
Housing Loans by Postcode Concentration -- Top 10 by Loan Amount..........49
Housing Loans by Loan Seasoning...........................................49
Housing Loans by Maturity.................................................49
Housing Loans by Mortgage Insurer.........................................50
Housing Loans by Mortgage Insurer and Royal & Sun Alliance LMI............50
Housing Loans by Mortgage Insurer and LVR PMI Mortgage Insurance..........50
-ii-
TABLE OF CONTENTS
(continued)
PAGE
Housing Loans by Mortgage Insurer and LVR GE Mortgage Insurance...........51
Housing Loans by Mortgage Insurer and LVR Commonwealth of Australia.......52
Housing Loans by Mortgage Insurer and LVR PMI Indemnity...................52
Housing Loans by Current Coupon Rates.....................................53
Housing Loans by Months Remaining to Maturity.............................53
INTERSTAR RESIDENTIAL LOAN PROGRAM............................................54
Origination Process.......................................................54
Approval and Underwriting Process.........................................54
General Features of the Housing Loans.....................................56
Special Features of the Housing Loans.....................................57
Additional Features of the Housing Loans..................................59
THE MORTGAGE INSURANCE POLICIES...............................................60
General ..................................................................60
Certain Provisions of Mortgage Insurance Policies.........................60
Description of the Mortgage Insurers......................................62
THE TITLE INSURANCE POLICIES..................................................65
Cover .................................................................65
Period of Cover...........................................................65
Refusal or Reduction in Claim.............................................66
Exclusions................................................................66
Description of Title Insurer..............................................67
DESCRIPTION OF THE US$ NOTES..................................................68
General ..................................................................68
Form of the US$ Notes.....................................................68
Distributions on the Notes................................................72
Key Dates and Periods.....................................................74
Calculation of Income.....................................................76
Income .................................................................76
Application of Mortgage Principal Repayments and Liquid Authorized
Investments to Available Income..... ..................................76
Distribution of Available Income..........................................77
-iii-
TABLE OF CONTENTS
(continued)
PAGE
Additional Income Payments................................................79
Interest on the Notes.....................................................80
Mortgage Principal Repayments.............................................81
Principal Distributions...................................................81
Charge-offs...............................................................84
Payments Into US$ Account.................................................85
Payments Out of US$ Account...............................................85
Notices ..................................................................85
The Fixed-Floating Rate Swap..............................................85
The Currency Swaps........................................................87
Currency Swap Provider....................................................92
Swap Collateral Account...................................................92
Withholding or Tax Deductions.............................................93
Redemption of the Notes for Taxation or Other Reasons.....................93
Redemption of the Notes Upon an Event of Default..........................94
Optional Redemption of the Notes..........................................95
Final Maturity Date.......................................................96
Final Redemption of the Notes.............................................96
Termination of the Trust..................................................97
Prescription..............................................................98
Reports to Noteholders....................................................98
Voting and Consent of Noteholders.........................................99
DESCRIPTION OF THE TRANSACTION DOCUMENTS.....................................100
Trust Accounts...........................................................100
Modifications............................................................100
The Issuer Trustee.......................................................101
The Trust Manager........................................................104
The Note Trustee.........................................................106
Note Trustee's Annual Report.............................................107
List of Noteholders......................................................107
Reports .................................................................108
-iv-
TABLE OF CONTENTS
(continued)
PAGE
The Security Trust Deed..................................................108
The Check Account and Direct Paperless Entry Facilities Agreement........116
The Investment Management Agreement......................................117
The Backup Servicer Agreements...........................................121
THE SERVICER.................................................................123
Servicing of Housing Loans...............................................123
Collection and Enforcement Procedures....................................123
Collection and Foreclosure Process.......................................124
Servicer Delinquency Experience..........................................126
PREPAYMENT AND YIELD CONSIDERATIONS..........................................127
General .................................................................127
Prepayments..............................................................127
Weighted Average Lives...................................................128
PERCENTAGE OF INITIAL PRINCIPAL OUTSTANDING AT THE FOLLOWING PERCENTAGES
OF CONSTANT PREPAYMENT RATE..............................................131
USE OF PROCEEDS..............................................................133
LEGAL ASPECTS OF THE HOUSING LOANS...........................................133
General .................................................................133
Nature of Housing Loans as Security......................................133
Strata Title.............................................................134
Urban Leasehold..........................................................134
Taking Security Over Land................................................135
Enforcement of Registered Mortgages......................................135
Penalties and Prohibited Fees............................................136
Bankruptcy...............................................................137
Environmental............................................................137
Insolvency Considerations................................................138
Tax Treatment of Interest on Australian Housing Loans....................138
Consumer Credit Legislation..............................................138
UNITED STATES FEDERAL INCOME TAX MATTERS.....................................140
Overview ................................................................140
-v-
TABLE OF CONTENTS
(continued)
PAGE
Interest Income on the US$ Notes.........................................141
Sale of Notes............................................................141
Market Discount..........................................................142
Premium .................................................................143
Backup Withholding.......................................................143
AUSTRALIAN TAX MATTERS.......................................................145
Payments of Principal, Premiums and Interest.............................145
Note Transfers...........................................................146
Profit on Sale by Non-resident Noteholders...............................146
Goods and Services Tax...................................................147
Fixed-Floating Rate Swap and GST.........................................148
Currency Swaps and GST...................................................148
Debt and Equity..........................................................149
Other Taxes..............................................................149
Taxation of the Trust....................................................150
Tax Reform Proposals.....................................................150
ENFORCEMENT OF FOREIGN JUDGMENTS IN AUSTRALIA................................151
EXCHANGE CONTROLS AND LIMITATIONS............................................152
Anti-terrorism restrictions..............................................152
Prohibited transactions..................................................152
Transactions which may be approved by the Reserve Bank of Australia......152
ERISA CONSIDERATIONS.........................................................152
LEGAL INVESTMENT CONSIDERATIONS..............................................154
AVAILABLE INFORMATION........................................................154
RATINGS OF THE NOTES.........................................................155
PLAN OF DISTRIBUTION.........................................................155
Underwriting.............................................................155
Offering Restrictions....................................................157
GENERAL INFORMATION..........................................................160
Listing ................................................................160
Authorization............................................................160
-vi-
TABLE OF CONTENTS
(continued)
PAGE
Litigation...............................................................160
Euroclear and Clearstream, Luxembourg....................................160
ANNOUNCEMENT.................................................................160
LEGAL MATTERS................................................................160
GLOSSARY ....................................................................161
-vii-
DISCLAIMERS WITH RESPECT TO SALES TO NON-U.S. INVESTORS
This section applies only to the offering of the US$ 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 2003-1G 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 US$ notes in any country
or jurisdiction. The US$ notes may be offered non-publicly in other
jurisdictions. The US$ 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 US$ notes. You should inform yourself about and observe any of
these restrictions. For a description of further restrictions on offers and
sales of the US$ 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 US$ 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 underwriters, National Australia Bank Limited, as fixed-floating rate swap
provider, [Barclays Bank PLC], as currency swap provider, 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 US$ notes.
Perpetual Trustees Victoria Limited, in its personal capacity and as
issuer trustee, 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, National Australia Bank Limited, as fixed-floating rate swap provider,
[Barclays Bank PLC], as currency swap provider, 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 US$ notes and do not accept
any responsibility or make any representation as to the tax consequences of
investing in the US$ 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 US$ 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 US$ notes; should make his
or her own independent investigation of the trust and the US$ notes; and should
seek its own tax, accounting and legal advice as to the consequences of
investing in any of the US$ 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 US$ 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
o any other information supplied in connection with the US$ 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.
None of the rating agencies have been involved in the preparation of
this prospectus.
-2-
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 DOCUMENT 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 PERSON 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, 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, 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 a seller and 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, National Australia Bank Limited, as
fixed-floating rate swap provider, [Barclays Bank PLC], as currency
swap provider, or any underwriter 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 2003-1G 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 Asia Limited (ABN 99 095 545 887)
SECONDARY BACKUP SERVICER.......................KPMG Corporate Finance (Aust) Pty Limited (ABN 43 007 363 215)
SELLERS.........................................Interstar Nominees (B) Pty Limited (ABN 15 075 329 412)
Interstar Nominees (R) Pty Limited (ABN 57 092 315 716)
Interstar Securities (Australia) Pty Limited
PRINCIPAL PAYING AGENT..........................The Bank of New York, New York branch
CALCULATION AGENT...............................The Bank of New York, New York branch
RESIDUAL INCOME BENEFICIARY.....................Interstar Securities (Australia) Pty Limited
UNDERWRITERS....................................Barclays Capital Inc.
[_______________]
[_______________]
1
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..........................[Barclays Bank PLC]
RATING AGENCIES.................................Moody's and S&P
2
STRUCTURAL DIAGRAM
BORROWERS
SELLERS
Interstar Nominees (B) Pty Limited
Interstar Nominees (R) Pty Limited A$ Housing
Interstar Securities (Australia) Pty Loan Payments SECURITY TRUSTEE
Limited Perpetual Trustee
Company Limited
COLLECTIONS BANK
National Australia First ranking floating charge
Bank Limited over the assets of the trust
MORTGAGE INSURERS
PMI Indemnity Limited
TRUST MANAGER Equitable PMI Mortgage Insurance Ltd
Interstar Securitisation assignment of GE Capital Mortgage Insurance
Management Pty Limited housing loans Corporation (Australia) Pty Ltd
Royal & Sun Alliance Lenders
Mortgage Insurance Limited
Commonwealth of Australia
PRIMARY
BACKUP
SERVICER ISSUER TRUSTEE Payments from Mortgage
Zurich Capital Perpetual Trustee Insurance Policies
Market Australia SERVICER Victoria Limited
Limited Interstar TITLE INSURER
Securities Interstar Millenium Series 2003- First American Title
(Australia) Pty 1G Trust Insurance Company
Limited of Australia Pty Limited
SECONDARY
BACKUP Payments from
SERVICER Payments on the The Title
KPMG Corporate US$ notes Insurance Policy
Finance (Aust)
Pty Limited RESIDUAL
BENEFICIAL
CURRENCY SWAP PROVIDER Interstar Securities
(Barclays Bank PLC) (Australia) Pty Limited
Payments on the
Class B2 notes
FIXED-FLOATING
RATE SWAP PROVIDER
National Australia PRINCIPAL PAYING AGENT
Bank Limited The Bank of New York, CLASS B2 NOTEHOLDERS
New York branch
CLEARING SYSTEMS
The Depositary Trust Company
Euroclear/ US$ NOTES
Clearstream, Luxembourg
NOTE TRUSTEE
US$ NOTE OWNERS The Bank of New York,
New York branch
3
SUMMARY OF THE NOTES
The issuer trustee will also issue Class B2 notes and may issue Class
A1 notes collateralized by the same pool of housing loans as the US$ notes. The
Class B2 notes and the Class A1 notes have not been and will not be registered
under the Securities Act of 1933 and are not being offered by this prospectus.
When used in this prospectus the term "US$ notes" will mean the Class A2 notes
and the Class B1 notes and the term "US$ noteholders" when used in this
prospectus will mean the holders of any Class A2 notes and/or Class B1 notes.
The term "Class A notes" when used in this prospectus will mean the Class A1
notes and the Class A2 notes and the term "Class B notes" when used in this
prospectus will mean the Class B1 notes and the Class B2 notes. The term "notes"
when used in this prospectus will mean the Class A notes and the Class B notes.
---------------------------------------------------------------------------------------------------
CLASS A2 CLASS B1 CLASS B2
---------------------------------------------------------------------------------------------------
Aggregate Initial Principal US$[750,000,000] US$[25,000,000] A$[55,000,000]
Amount:
---------------------------------------------------------------------------------------------------
% of Total: [93]% [3]% [4]%
---------------------------------------------------------------------------------------------------
Anticipated Ratings:
Moody's Aaa Not rated Not rated
S&P AAA AA-(CreditWatch AA-(CreditWatch
Developing) Developing)
---------------------------------------------------------------------------------------------------
Interest rate from the three-month LIBOR + three-month LIBOR+ one-month
closing date up to but Australian Bank
excluding the step-up Bill Rate plus a
margin date margin
---------------------------------------------------------------------------------------------------
Interest rate from and three-month LIBOR + three-month LIBOR+ one-month
including the step-up Australian Bank
margin date Bill Rate plus a
margin
---------------------------------------------------------------------------------------------------
Minimum Denominations: US$100,000 and US$100,000 and A$[10,000] (with
thereafter, minimum thereafter, minimum initial minimum
increments of US$1,000 increments of subscription of
US$1,000 A$500,000
---------------------------------------------------------------------------------------------------
Interest Accrual Method: actual/360 actual/360 actual/365
---------------------------------------------------------------------------------------------------
Monthly/Quarterly Quarterly Payment Quarterly Payment Monthly Payment
Payment Dates: Dates: the 20th day Dates: the 20th day Dates: the 20th
or, if the 20th day is or, if the 20th day day of each
not a business day, is not a business calendar month or,
then the next business day, then the next if the 20th day is
day of each [February, business day of each not a business day,
May, August and [February, May, then the next
November]. The first August and business day. The
quarterly payment date November]. The first monthly
will be in [May 2003]. first quarterly payment date will
payment date will be be in [March 2003].
in [May 2003].
---------------------------------------------------------------------------------------------------
4
---------------------------------------------------------------------------------------------------
Clearance/Settlement: DTC/Euroclear/ DTC/Euroclear/ Offered in
Clearstream, Luxembourg Clearstream, Australia only
Luxembourg
---------------------------------------------------------------------------------------------------
Initial Cut-Off Date: Close of Business December 13, 2002
---------------------------------------------------------------------------------------------------
Pricing Date: On or about [_____________], 2003
---------------------------------------------------------------------------------------------------
Closing Date: [_____________], 2003
---------------------------------------------------------------------------------------------------
Step-Up Margin Date: The quarterly payment date falling in
February 2010
---------------------------------------------------------------------------------------------------
Final Maturity Date: The quarterly payment date falling in
July 2035
---------------------------------------------------------------------------------------------------
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.
----------------------------- ---------------------------------------------------------------------
5
STRUCTURAL OVERVIEW
The Interstar Millennium Trusts securitisation program was established
pursuant to a master trust deed dated December 2, 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 Securities (Australia) Pty Limited
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
2003-1G 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
2003-1G 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 2003-1G Trust. See "Description of the Trust".
The Interstar Millennium Series 2003-1G 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
Securities (Australia) 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
crystallizes, which means it becomes a fixed charge. The charge will crystallize
if, among other events, an event of default occurs under the security trust
deed. Once the floating charge crystallizes, 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 US$ notes will be supported
by the following forms of credit enhancement.
6
SUBORDINATION AND ALLOCATION OF LOSSES
The Class B notes will be subordinated to the Class A2 notes in their
right to receive interest payments. If the threshold requirements are satisfied,
principal payments will be allocated rateably between the Class A2 notes and the
Class B notes based on their principal balances. However, if the threshold
requirements are not satisfied, the Class B notes will be subordinated in their
right to receive principal payments. In all cases the Class B1 notes and the
Class B2 notes will rank equally in their right to receive principal payments.
No Class A2 note will be issued unless all of the Class B notes are issued.
The credit support provided by the Class B notes is intended to enhance
the likelihood that the Class A2 notes will receive expected quarterly 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 Class B notes [7%]
The initial support percentage in the preceding table is the initial
balance of the Class B notes, in the case of the Class B1 notes the Australian
dollar equivalent, 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 rank equally with the Class A2 notes in
their right to receive interest payments and, prior to the occurrence of an
event of default and enforcement of the charge under the security trust deed,
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.
To the extent that there is a loss on a housing loan not covered by a
mortgage insurance policy or a title insurance policy or by the application of
excess income, the amount of such loss will be borne first by the Class B notes
before it is borne by the Class A notes. See "Description of the US$ Notes --
Charge Offs".
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.
7
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 investments are available to make interest
payments on the notes and to pay senior 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 made
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 liquid authorized
investments and 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 servicer, 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".
8
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-floating rate swap will be
entered into by the issuer trustee.
o two currency swaps, one in respect of the Class A2 notes and one in
respect of the Class B1 notes, to hedge the currency risk between,
on one hand, the collections on the housing loans and the amounts
received by the issuer trustee under any 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 and the Class B1 notes, which are each
denominated in U.S. dollars, together with the basis risk between,
on one hand, amounts in respect of interest calculated under the
floating rate housing loans or under any 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 and the Class B1 notes by reference to LIBOR.
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
9
or withhold from any payment under a 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$193,750] or 25% of the Australian dollar equivalent of
the initial outstanding principal amount of the US$ notes as of the closing
date. See "Description of the Assets of the Trust -- Acquisition of Housing
Loans after the Closing Date".
10
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 DECEMBER 13, 2002
Housing Loan Pool Size.........................................A$1,322,537,613
Total Number of Housing Loans.................................. 7,404
Average Housing Loan Balance................................... A$178,625
Maximum Housing Loan Balance................................... A$828,000
Minimum Housing Loan Balance................................... A$0
Total Valuation of the Properties..............................A$2,649,989,148
Maximum Remaining Term to Maturity in months................... 346
Weighted Average Remaining Term to Maturity in months.......... 342
Weighted Average Seasoning in months........................... 2
Weighted Average Original Loan-to-Value Ratio.................. 72.79%
Weighted Average Current Loan-to-Value Ratio................... 70.37%
Maximum Current Loan-to-Value Ratio............................ 90.00%
The original loan-to-value ratio of a housing loan is calculated by
comparing the initial principal amount of the housing loan to the most recent
valuation of the property that is currently securing the housing loan. Thus, if
collateral has been released from the mortgage securing a housing loan or if the
property securing the housing loan has been revalued, the original loan-to-value
ratio may not reflect the actual loan-to-value ratio at the origination of that
housing loan.
Before the issuance of the notes, housing loans may be added to or
removed from the housing loan pool. New housing loans may also be substituted
for housing loans that are removed from the housing loan pool. This addition,
removal or substitution of housing loans may result in changes in the housing
loan pool characteristics shown in the preceding table and could affect the
weighted average lives and yields of the notes. The sellers will not add, remove
or substitute any housing loans prior to the closing date if this would result
in a change of more than 5% in any of the characteristics of the pool of housing
loans described in the above table, unless a revised prospectus is delivered to
prospective investors.
11
WITHHOLDING TAX
Payments of principal and interest on the US$ 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 US$
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 a 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 the issuer trustee will
be in a position to discharge all of its liabilities in respect of the notes,
redeem all of the notes. See "Description of the US$ 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 US$ notes will be characterized as debt for U.S. federal
income tax purposes. Each US$ noteholder, by acceptance of a US$ note, agrees to
treat the notes as indebtedness. See "United States Federal Income Tax Matters".
AUSTRALIAN TAX STATUS
The US$ notes should be characterized as debt for Australian tax
purposes. See "Australian Tax Matters".
LEGAL INVESTMENT
The US$ 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 US$ notes as legal investments for you.
See "Legal Investment Considerations".
ERISA CONSIDERATIONS
In general, the US$ 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 US$ notes. See "ERISA
Considerations."
BOOK-ENTRY REGISTRATION
Persons acquiring beneficial ownership interests in the US$ notes will
hold their US$ notes through The Depository Trust Company in the United
12
States or Clearstream, Luxembourg or 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 swaps;
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 mortgage principal
repayments. Collections attributable to interest and fees are known as income.
The collections attributable to principal are known as mortgage principal
repayments.
Income is normally used to pay fees and expenses of the issuer trustee
in connection with the trust, together with interest on the notes. Mortgage
principal repayments are 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, the trust manager will direct
the issuer trustee to apply liquid authorized investments then mortgage
principal repayments to pay such unpaid fees, expenses and interest. Any liquid
authorized investments and mortgage principal repayments 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. If there is excess income after payment of fees and expenses
of the issuer trustee, interest on the notes and replenishment of liquid
authorized investments and mortgage principal repayments such excess income will
first reimburse any charge-offs and then any carryover charge-offs on the
housing loans. Any remaining excess income will be distributed to the residual
income beneficiary at the end of each collection period.
INTEREST ON THE NOTES
Interest on the US$ notes will be payable quarterly in arrears on each
quarterly payment date. Interest on the Class B2 notes and the Class A1 notes
will be payable monthly in arrears on each monthly payment date. Amounts
available
13
to make 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. Amounts available to make interest payments on the Class A notes will be
allocated rateably between the Class A1 notes and the Class A2 notes based on
the amount of Australian dollar interest owed. Amounts available to make
interest payments on the Class B notes will be allocated rateably between the
Class B1 notes and the Class B2 notes based on the amount of Australian dollar
interest owed. 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 US$ notes, or 365 days for the Class
B2 notes and the Class A1 notes.
PRINCIPAL ON THE NOTES
Principal on the US$ notes will be payable on each quarterly payment
date. Principal on the Class B2 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, until the Class A1 notes have been redeemed in full. If
the threshold requirements have been met, principal payments will then be
allocated rateably among the Class A2 notes and the Class B notes based on their
principal balances or the Australian dollar equivalent of their principal
balances. If the threshold requirements have not been met, principal payments
will be paid first on the Class A2 notes until such time as all the Class A2
notes have been redeemed in full and then pro rata among the Class B notes based
on their principal balances or the Australian dollar equivalent of their
principal balances until such time as all the Class B notes have been redeemed
in full. 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, payment date. The charts on the next two pages summarize the
flow of payments.
14
DISTRIBUTION OF INCOME ON
EACH MONTHLY PAYMENT DATE
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, the servicer 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, the
servicer 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, the
servicer 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 pro rata the trust manager's fee and the servicer's fee
Pay pro rata:
o any amounts payable to the fixed-floating rate swap provider under
any 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 (1) the Class A2 A$ Interest Amount for that monthly payment date
to the currency swap provider for conversion to U.S. dollars 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 or (2) if the Class A2 currency
swap is terminated an A$ amount that the trust manager determines
in good faith to be applied on that monthly payment date in order
to enable the issuer trustee to meet its obligations to pay
interest on the Class A2 notes on the related quarterly payment
date, 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
Class A2 currency swap other than in respect of the termination of
the Class A2 currency swap where the currency swap provider is the
defaulting party
Pay pro rata and according to the amount of interest payable to each
class:
o (1) the Class B1 A$ Interest Amount for that monthly payment date
to the currency swap provider for conversion to U.S. dollars and
any reciprocal payment by the currency swap provider is thereafter
to be applied towards payment of interest on the Class B1 notes on
the related quarterly payment date or (2) if the Class B1 currency
swap is terminated an A$ amount that the trust manager determines
in good faith to be applied on that monthly payment date in order
to enable the issuer trustee to meet its obligations to pay
interest on the Class B1 notes on the related quarterly payment
date, 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 B1 notes on the related quarterly payment date
o any interest for the interest period ending on that monthly payment
date to the Class B2 noteholders
o to the currency swap provider any break costs payable under the
Class B1 currency swap other than in respect of the termination of
the Class B1 currency swap where the currency swap provider is the
defaulting party
15
DISTRIBUTION OF AVAILABLE INCOME ON
EACH MONTHLY PAYMENT DATE (CONTINUED)
Apply as Mortgage Principal Repayments amounts previously used from Liquid
Authorized Investments and Mortgage Principal Repayments to make up any Income
Shortfalls to the extent such amount has not been previously repaid
Reduce the Aggregate Principal Loss Amount in relation to the collection period
Reduce the total amount of any Carryover Charge-offs
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 swaps 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
16
DISTRIBUTION OF MORTGAGE PRINCIPAL REPAYMENTS,
LIQUID AUTHORIZED INVESTMENTS AND RECOVERY AMOUNTS ON EACH
MONTHLY PAYMENT DATE
Apply in funding redraws
Apply mortgage principal repayments and liquid authorized investments to
Available Income to make up any Income Shortfall
Replenish Liquid Authorized Investments until the value of Liquid Authorized
Investments equals the Prescribed Minimum Level
Payments of principal on the Class A1 notes
If the Threshold Requirements are satisfied, pro rata:
o Pay to the currency swap provider (1) prior to the termination of the
Class A2 currency swap, the Class A2 A$ Equivalent of the Class A2 Currency
Swap Notional Amount for that monthly payment date and reciprocal payment to
the currency swap provider is thereafter to be applied to repaying principal
on the Class A2 notes on the related quarterly payment date or (2) if the
Class A2 currency swap has been terminated, the note trustee for conversion
into U.S. dollars at the spot exchange rate to be applied in repaying
principal on the Class A2 notes on the related quarterly payment date
o Pay to the currency swap provider (1) prior to the termination of the
Class B1 currency swap, the Class B1 A$ Equivalent of the Class B1 Currency
Swap Notional Amount for that monthly payment date and reciprocal payment to
the currency swap provider is thereafter to be applied to repaying principal
on the Class B1 notes on the related quarterly payment date or (2) if the
Class B1 currency swap has been terminated, the note trustee for conversion
into U.S. dollars at the spot exchange rate to be applied in repaying
principal on the Class B1 notes on the related quarterly payment date
o Pay to Class B2 noteholders in payment of the Principal Amount of the Class
B2 notes
If the Threshold Requirements are not satisfied, in the following order of
priority:
o Pay to the currency swap provider (1) prior to the termination of the
Class A2 currency swap, the Class A2 A$ Equivalent of the Class A2 Currency
Swap Notional Amount for that monthly payment date and reciprocal payment to
the currency swap provider is thereafter to be applied to repaying principal
on the Class A2 notes on the related quarterly payment date or (2) if the
Class A2 currency swap has been terminated, the note trustee for conversion
into U.S. dollars 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
o pro rata:
o Pay to the currency swap provider (1) prior to the termination of the
Class B1 currency swap, the Class B1 A$ Equivalent of the Class B1
Currency Swap Notional Amount for that monthly payment date and
reciprocal payment to the currency swap provider is thereafter to be
applied to repaying principal on the Class B1 notes on the related
quarterly payment date or (2) if the Class B1 currency swap has been
terminated, the note trustee for conversion into U.S. dollars at the
spot exchange rate to be applied in repaying principal on the Class B1
notes on the related quarterly payment date, in each case until such
time as all Class B1 notes have been redeemed in full
o Pay to Class B2 noteholders in payment of the Principal Amount of the
Class B2 notes until such time as all Class B2 notes have been redeemed
in full
Payment as a distribution to the holder of the residual income unit
17
RISK FACTORS
The US$ 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 US$ notes. There may
be other unforeseen reasons why you might not receive principal or interest on
your US$ notes. You should also read the detailed information set out elsewhere
in the prospectus.
THE NOTES WILL BE PAID ONLY o The notes are debt obligations of the issuer
FROM THE ASSETS OF THE TRUST trustee only in its capacity as trustee of
the 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 OF on pools of housing loans varies among pools,
PAYMENTS ON THE HOUSING LOANS and is influenced by a variety of economic,
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, any fixed-floating rate
swap and the currency swaps 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:
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
18
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 ON loans when due and the credit enhancements
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 excess income,
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 excess income, a mortgage
insurance policy or a 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, title insurance
policy or available income. 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 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
19
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 SUBORDINATION OF THE o The amount of credit enhancement provided
CLASS B NOTES PROVIDES ONLY through the subordination of the Class B
LIMITED PROTECTION AGAINST notes to the Class A2 notes is limited and
LOSSES ON THE CLASS A2 NOTES could be depleted prior to the payment in
full of the Class A2 notes. If principal
losses incurred by the trust exceed the
principal amount of the Class B notes, you
may suffer losses on your notes.
YOU MAY NOT BE ABLE TO RESELL o The underwriters are not required to assist
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 both
SWAP PROVIDER the Class A2 currency swap and the Class B1
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 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
Class A2 currency swap or the Class B1
currency swap before paying the U.S. dollar
interest and principal 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.
20
THE TERMINATION OF ANY OF o The issuer trustee will exchange the interest
THE SWAPS MAY SUBJECT YOU payments from any fixed rate housing loans
TO LOSSES FROM INTEREST RATE for variable rate payments based upon the
OR CURRENCY FLUCTUATIONS one-month Australian bank bill rate. If a
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 US$ 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
both the Class A2 currency swap and the Class
B1 currency swap, the currency swap provider
will exchange Australian dollar receipts for
U.S. dollar 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 Class A2 currency swap and the Class B1
currency swap. If the currency swap provider
fails to perform its obligations or if either
the Class A2 currency swap or the Class B1
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 RESULT during a collection period, interest on the
IN YOU NOT RECEIVING YOUR FULL housing loan will cease to accrue on that
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 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 an event of default under the security trust
INSUFFICIENT TO PAY AMOUNTS deed, there is no assurance that the market
value of the assets of the trust will be
equal to or greater than
21
DUE TO YOU 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 US$ Notes --
YOUR NOTES MAY BE LOWER Optional Redemption of the Notes", the
THAN 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 interest on your notes, you will not be
LEAD TO AN EARLY REDEMPTION entitled to receive grossed-up amounts to
OF THE 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 the issuer trustee will be in
a position to discharge all of its
liabilities in respect of the notes, 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 payments at a comparable interest
rate.
THE FEATURES OF THE HOUSING o The features of the housing loans, including
LOANS MAY CHANGE, WHICH their interest rates, may be changed by the
COULD AFFECT THE TIMING AND servicer, either on its own initiative or at
AMOUNT 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.
22
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 investments are insufficient to cover fees,
INTEREST TO YOU expenses and the interest payments due with
respect to the US$ 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 US$ notes.
THE USE OF LIQUID AUTHORIZED o If liquid authorized investments or principal
INVESTMENTS OR PRINCIPAL collections are drawn upon to cover
COLLECTIONS TO COVER LIQUIDITY shortfalls in interest collections, and there
SHORTFALLS MAY LEAD TO is insufficient excess interest collections
PRINCIPAL LOSSES in succeeding collection periods to repay
those liquid authorized investments or
principal collections, 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 a prolonged period of expansion with
LEAD 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 the housing loans
may increase, which may cause losses on your
notes.
CONSUMER PROTECTION LAWS o Some of the housing loans are regulated by
MAY AFFECT THE TIMING OR Consumer Credit Legislation. Under that
AMOUNT OF INTEREST OR legislation, a borrower may have a right to
PRINCIPAL 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
23
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.
THE CONCENTRATION OF o The trust contains a high concentration of
HOUSING LOANS IN SPECIFIC housing loans secured by properties located
GEOGRAPHIC AREAS MAY within New South Wales and Victoria. Any
INCREASE THE POSSIBILITY OF deterioration in the real estate values or
LOSS ON YOUR 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.
YOU WILL NOT RECEIVE PHYSICAL o Your ownership of the notes will be
NOTES REPRESENTING YOUR registered electronically through DTC,
NOTES, WHICH CAN CAUSE Euroclear and/or Clearstream, Luxembourg. The
DELAYS IN RECEIVING lack of physical certificates could:
DISTRIBUTION AND HAMPER
YOUR ABILITY TO PLEDGE OR o cause you to experience delays in
RESELL YOUR NOTES 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
24
o hinder your ability to resell the notes
or reduce the price that you receive for
them.
SINCE THE TRUST MANAGER, o Each of Interstar Securitisation Management
THE 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 US$ NOTEHOLDERS courts for purposes of any suit, action or
IN U.S.COURTS BY AUSTRALIAN proceeding arising out of the offering of the
COURTS US$ 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 principal under the housing loans if
MADE ON THE CLASS A2 NOTES principal collections on the housing loans
are not sufficient. See "Interstar
Residential Loan Program -- Special Features
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.
THE CLASS B1 NOTES ARE o Prior to the enforcement of the charge under
SUBORDINATED TO THE CLASS A the security trust deed, the Class B1 notes
NOTES AND THEREFORE CLASS B1 will, in some circumstances, be subordinated
NOTEHOLDERS MAY NOT BE PAID to the Class A notes in their right to
ALL PRINCIPAL AND INTEREST ON receive principal payments and will be
THE CLASS B1 NOTES. subordinated to the Class A notes at all
times in their right to receive interest
payments. Following the occurrence of an
event of default and enforcement of the
charge under the security trust deed, the
Class B1 notes will be fully subordinated to
the Class A
25
notes in their right to receive principal and
interest payments. Accordingly, Class B1
noteholders may not be paid principal and
interest in full in respect of the Class B1
notes. Therefore you may not receive your
entire investment or the yield you expected
to receive.
PREPAYMENTS COULD RESULT o If there is any principal amount remaining in
FROM 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 quarterly
payment date, that amount will be applied in
repayment of principal to the noteholders in
the priority described in "Description of the
US$ 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 US$ 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 US$ notes.
TERMINATION PAYMENTS o Upon termination of a swap, a termination
RELATING TO THE CURRENCY payment will be due either from the issuer
SWAPS OR A FIXED-FLOATING trustee to the swap provider or vice versa.
RATE SWAP ARE SUBJECT TO If the swap provider is required to make a
CREDIT RISKS 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.
CURRENCY SWAP TERMINATION o If the Class A2 currency swap or the Class B1
PAYMENT TO THE CURRENCY currency swap terminates before its scheduled
SWAP PROVIDER MAY REDUCE termination date, a termination payment by
PAYMENTS ON YOUR US$ NOTES either the issuer trustee or the 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
26
trustee to the currency swap provider will be
payable out of assets of the trust. If the
Class A2 currency swap or the Class B1
currency swap terminates early under
circumstances where the currency swap
provider is the defaulting party, any payment
due by the issuer trustee under the relevant
currency swap will have a lower priority than
payments of interest on the notes. If the
Class A2 currency swap or the Class B1
currency swap terminates early under any
other circumstances, any payment due by the
issuer trustee under the relevant currency
swap will have an equal priority with
interest payments on the relevant US$ notes.
THIS PROSPECTUS PROVIDES o This prospectus describes only the
INFORMATION REGARDING ONLY characteristics of the housing loan pool as
A PORTION OF THE HOUSING LOAN of December 13, 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 date, and any additional housing loans
DIFFERENT 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 US$ 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.
27
RATINGS OF THE US$ NOTES DO o It is a condition to the issuance of the
NOT INSURE THEIR PAYMENT Class A2 notes that they be rated Aaa by
AND WITHDRAWAL OF ANY Moody's and AAA by S&P and that the Class B1
RATINGS MAY AFFECT THE VALUE notes be rated at least AA-(CreditWatch
OF THE US$ NOTES Developing) by S&P. Preliminarily, S&P has
indicated that the Class B1 notes will be
placed on "CreditWatch developing" at the
time of issuance as a result of the placement
of the credit rating of one of the mortgage
insurers, Royal & Sun Alliance Lenders
Mortgage Insurance Limited, on "CreditWatch
developing". CreditWatch highlights the
potential direction of a rating, focusing on
identifiable events and short-term trends
that cause ratings to be placed under special
surveillance by S&P. Ratings appear on
CreditWatch when such an event or a deviation
from an expected trend occurs and additional
information is needed to evaluate the rating.
The "developing" designation means that a
rating may be raised, lowered of affirmed.
The rating of the Class B1 notes is highly
correlated to the rating of the mortgage
insurers. It is possible that, if S&P
downgrades the credit rating of Royal & Sun
Alliance Lenders Mortgage Insurance Limited,
S&P could lower its rating on the Class B1
notes.
A rating is not a recommendation to purchase,
hold or sell the US$ notes, inasmuch as such
a rating does not address the market price or
the suitability for a particular investor of
a security. The ratings of the US$ notes
address the likelihood of the payment of
principal and interest on the US$ 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 US$ notes will be based
primarily on the creditworthiness of the
housing loans, the mortgage insurance
polices, the title insurance policies, the
creditworthiness of the mortgage insurers and
the title insurers, the availability of
income after payment of the trust's expenses
and interest on the notes, the
creditworthiness of the swap providers and
the subordination provided by the Class B
notes with respect to the Class A notes.
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 US$ NOTES servicer event of default under the
investment management agreement, the issuer
trustee must immediately terminate the
investment management agreement. Under the
primary backup servicer agreement,
28
if Interstar Securities (Australia) Pty
Limited is removed as servicer the issuer
trustee must offer to appoint Zurich Capital
Markets Asia Limited as servicer. If Zurich
Capital Markets Asia Limited does not accept
that appointment, under the secondary backup
servicer agreement KPMG Corporate Finance
(Aust) Pty Limited has agreed to carry out
the duties of the servicer. 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 o The servicer will make certain
NOT HAVE THE CHARACTERISTICS representations and warranties to the issuer
AS SET OUT IN THE trustee, to each noteholder and to the
REPRESENTATIONS AND security trustee in relation to the housing
WARRANTIES MADE BY loans to be assigned to the issuer trustee,
THE SERVICER as at the cut-off date and the purchase date
for those housing loans. The issuer trustee
has not investigated or made any enquiries
regarding the accuracy of the representations
and warranties.
o No independent investigation of whether each
and every housing loan offered for sale at
the closing date or any other 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 BE o The trust manager, not the issuer trustee,
AVAILABLE TO COVER ANY LOSSES takes responsibility for the prospectus. As a
SUFFERED BY YOU FOR ANY result, in the event that a person suffers
MISLEADING STATEMENT OR loss due to any information contained in this
OMISSION OF A MATERIAL prospectus being inaccurate or misleading, or
MATTER IN THIS PROSPECTUS omitting a material matter or thing, that
person will not have recourse to the assets
of the trust.
29
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 ___.
U.S. DOLLAR PRESENTATION
In this prospectus, references to "U.S. dollars", "United States
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$0.5842 = A$1.00, the exchange rate as displayed
on the Bloomberg Service under AUD currency HP on January 15, 2003. 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.
30
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.
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.
31
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 currently is ultimately beneficially owned
and controlled by Vernon Spencer, an Australian individual, and his immediate
family.
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$10 billion of
rated mortgage-backed securities.
As at December 31, 2002, Interstar Securities (Australia) Pty Limited
managed a housing loan portfolio of approximately A$8.25 billion.
32
The trust manager is a wholly owned direct subsidiary of the servicer.
The servicer is a wholly owned direct subsidiary of Interstar Securities
Holdings Pty Limited (INTERSTAR HOLDINGS). All shares in Interstar Holdings are
owned by Arcturus Management Pty Limited as trustee of the Arcturus Trust (in
that capacity AMPL).
AMPL entered into a call option arrangement with ZCM Australia Asset
Holdings (Bermuda) Limited (ZCM). Under the call option, ZCM (or any other
person to whom ZCM directs AMPL to transfer the shares) has the option to
acquire all of the shares in Interstar Holdings on not less than 35 business
days notice at any time up to and including June 30, 2005. The exercise price
for the call option will be determined by reference to the value of the assets
of any funding enterprises (including companies and trusts) which hold financial
assets and which entity or assets are owned, controlled, serviced or managed by
[the Interstar Holdings group]. In addition to the exercise price, certain
incentive payments may be payable by ZCM to AMPL, provided that the value of the
assets of the relevant funding enterprises reaches certain agreed targets.
AMPL has borrowed, or is entitled to borrow, certain amounts from
Zurich Capital Markets Australia Structured Finance Pty Limited (ZCMA), an
affiliate of ZCM. ZCM may direct AMPL to apply the proceeds from the exercise of
the call option first towards the payment of loan principal, interest and other
related amounts which AMPL owes to ZCMA on the date the call option is
exercised. If ZCM exercises the call option, the trust manager and the servicer
will become wholly owned, indirect subsidiaries of the transferee of the shares
of Interstar Holdings.
ZCM is a limited liability company incorporated in Australia with its
principal place of business at Level 47, 2 Park Street, Sydney, New South Wales
2000. It is a wholly owned indirect subsidiary of Zurich Financial Services
(ZFS). 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 in North
America, the United Kingdom and continental Europe. ZFS, founded in 1872, 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 June 30, 2002, based on audited International Accounting Standard
financial statements, ZFS had total assets of US$275,703 million, total
liabilities of US$258,295 million, shareholders' equity of US$14,873 million and
minority interests of US$2,535 million. International Accounting Standards may
not conform to generally accepted accounting principles applied by United States
companies.
The trust manager expects that the call option will be exercised
according to its terms. However, it has not received any such confirmation from
ZCM or any other member of the Group and there can be no assurance that the call
option will be exercised. Neither the trust manager nor the servicer is a party
to the call option, the documents prepared in connection with the call option or
the loan from ZCMA to AMPL.
33
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 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.
34
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 borrows money from Macquarie 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.
INTERSTAR SECURITIES (AUSTRALIA) PTY LIMITED
Interstar Securities (Australia) Pty Limited is the residual income
unitholder of the Interstar Millennium Warehouse B Trust, the Interstar
Millennium Warehouse N Trust and the Interstar Millennium Warehouse R Trust,
each of which is a trust within the Interstar Millennium Trusts securitization
program. Perpetual Trustees Victoria Limited is the trustee of each of these
trusts. In each of these capacities, Perpetual Trustees Victoria Limited borrows
money from Macquarie Bank Limited, National Australia Bank Limited or Barclays
Bank PLC (as the case may be) to enable it to fund the acquisition of housing
loans.
35
THE BACKUP SERVICERS
ZURICH CAPITAL MARKETS ASIA LIMITED
Zurich Capital Markets Asia 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
ZFS. ZCMAL manages operations throughout the Asian region to develop capital
markets and banking operations for Zurich Capital Markets, a subsidiary of ZFS.
KPMG CORPORATE FINANCE (AUST) PTY LIMITED
KPMG Corporate Finance (Aust) Pty Limited is part of a global network
of professional advisory firms that have offices in 750 cities in 152 countries.
Its services include assurance, financial advisory services, tax and legal. KPMG
Corporate Finance (Aust) Pty Limited is contracted to be the backup servicer for
Interstar Securities (Australia) Pty Limited.
36
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
2003-1G Trust is a separate and distinct trust from any other trust established
under the master trust deed. The assets of the Interstar Millennium Series
2003-1G 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 2003-1G Trust.
INTERSTAR MILLENNIUM SERIES 2003-1G TRUST
The detailed terms of the Interstar Millennium Series 2003-1G 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.
37
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:
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, and its
rights under any fixed-floating rate swap and the currency swaps.
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.
38
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 sum of the Class A2 A$
Equivalent of [US$750,000,000] and the Class B1 A$ Equivalent of
[US$25,000,000], or 25% of the sum of the Class A2 A$ Equivalent of the initial
outstanding principal amount of the Class A2 notes and the Class B1 A$
Equivalent of the initial outstanding principal amount of the Class B1 notes. 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 US$
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
39
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 2003-1G 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;
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;
40
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:
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;
41
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;
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;
42
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 the housing loan is covered by a valid, binding and enforceable
mortgage insurance policy;
o the housing loan has a borrower -- and where the trust manager so
requires, a guarantor -- that is a natural person or a corporation;
o the housing loan 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
May 2033;
o the housing loan 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:
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
43
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.
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
44
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 December 13, 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.
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 __,
unless a revised prospectus is delivered to prospective investors.
45
HOUSING LOAN INFORMATION
ANALYSIS OF THE HOUSING LOAN POOL
Total pool size........................................................................... $1,322,537,613
Total number of loans..................................................................... 7,404
Average loan size......................................................................... $178,624.75
Maximum loan size......................................................................... $828,000.00
Total property value (current)............................................................ $2,649,989,148
Weighted Average current LVR.............................................................. 70.37%
% of pool with loans > 80% LVR............................................................ 28.28%
Weighted Average Term to Maturity (months) . 341.59
Weighted Average Seasoning (months)....................................................... 2.17
Maximum Remaining Term to Maturity (months) 346
% of pool with loans > $300,000 (by number)............................................... 14.86%
% of pool with loans > $300,000 (by loan amount).......................................... 32.65%
% of pool in arrears (by loan amount):
1-30 days................................................................................. 1.18%
31-60 days................................................................................ 0.00%
61 + days................................................................................. 0.00%
Total................................................................................ 1.18%
HOUSING LOANS BY OCCUPANCY
AVERAGE
NUMBER OF % OF TOTAL DOLLAR AMOUNT % OF TOTAL BALANCE WGT AVE
LOANS NO. OF LOANS A$ A$ AMOUNT A$ LVR%
--------- ------------ ------------- --------- ------- -------
Owner Occupied - House.... 4,063 54.88% 657,205,785 49.69% 161,754 66.94%
Owner Occupied - Unit..... 557 7.52% 96,921,004 7.33% 174,005 72.01%
Investment - House........ 1,815 24.51% 380,261,154 28.75% 209,510 72.97%
Investment - Unit......... 969 13.09% 188,149,6 14.23% 194,169 76.19%
--------- ------------ ------------- --------- ------- -------
Total..................... 7,404 100.00% 1,322,537,613 100.00% 178,625 70.37%
========= ============ ============= ========= ======= =======
46
HOUSING LOANS BY LVR (LOAN-TO-VALUE RATIO)
% OF AVERAGE
NUMBER OF % OF TOTAL DOLLAR AMOUNT TOTAL A$ BALANCE WGT AVG
LOANS NO. OF LOANS A$ AMOUNT A$ LVR%
--------- ------------ -------------- --------- ------- -------
[less than or equal]20% ......................... 623 8.41% 27,455,684 2.08% 44,070 13.76%
[greater than]20% and [less than or equal]25%.... 191 2.58% 16,289,955 1.23% 85,288 22.53%
[greater than]25% and [less than or equal]30%.... 179 2.42% 19,306,437 1.46% 107,857 27.51%
[greater than]30% and [less than or equal]35%.... 198 2.67% 23,857,022 1.80% 120,490 32.54%
[greater than]35% and [less than or equal]40%.... 228 3.08% 29,385,461 2.22% 128,884 37.79%
[greater than]40% and [less than or equal]45%.... 259 3.50% 37,152,924 2.81% 143,448 42.52%
[greater than]45% and [less than or equal]50%.... 259 3.50% 42,153,676 3.19% 162,756 47.60%
[greater than]50% and [less than or equal]55%.... 237 3.20% 40,304,408 3.05% 170,061 52.74%
[greater than]55% and [less than or equal]60%.... 317 4.28% 56,225,022 4.25% 177,366 57.65%
[greater than]60% and [less than or equal]65%.... 469 6.33% 84,338,209 6.38% 179,826 62.81%
[greater than]65% and [less than or equal]70%.... 421 5.69% 81,984,878 6.20% 194,738 67.60%
[greater than]70% and [less than or equal]75%.... 616 8.32% 133,979,131 10.13% 217,499 73.12%
[greater than]75% and [less than or equal]80%.... 1,661 22.44% 356,068,066 26.91% 214,370 79.00%
[greater than]80% and [less than or equal]85%.... 667 9.01% 149,909,885 11.34% 224,752 81.06%
[greater than]85% and [less than or equal]90%.... 1,079 14.57% 224,126,855 16.95% 207,717 89.37%
[greater than]90% and [less than or equal]95%.... 0 0.00% 0 0.00% 0 0.00%
[greater than]95%....................... ........ 0 0.00% 0 0.00% 0 0.00%
--------- ------------ -------------- --------- ------- -------
Total.................. .................... 7,404 100.00% 1,322,537,613 100.00% 178,625 70.37%
========= ============ ============== ========= ======= =======
HOUSING LOANS BY PRODUCT TYPES
% OF TOTAL % OF AVERAGE
NUMBER OF NO. OF DOLLAR AMOUNT TOTAL A$ BALANCE WGT AVG
LOANS LOANS A$ AMOUNT A$ LVR%
--------- ---------- ------------- -------- ------- -------
Variable - Principal & Interest 3,905 52.74% 716,029,708 54.14% 183,362 70.47%
Variable - Interest Only......................... 2,784 37.60% 544,804,126 41.19% 195,691 71.34%
Variable - Line of Credit........................ 717 9.66% 61,703,779 4.67% 86,299 60.50%
Fixed............................................ 0 0.00% 0 0.00% 0 0.00%
--------- ---------- ------------- -------- ------- -------
Total......................................... 7,404 100.00% 1,322,537,613 100.00% 178,625 70.37%
========= ========== ============= ======== ======= =======
47
HOUSING LOANS BY GEOGRAPHIC DISTRIBUTION
% OF AVERAGE
NUMBER OF % OF TOTAL DOLLAR AMOUNT TOTAL A$ BALANCE WGT AVG
LOANS NO. OF LOANS A$ AMOUNT A$ LVR%
--------- ------------ ------------- -------- ------- -------
NSW (Metro)................ 2,921 39.46% 639,142,522 48.33% 218,809 69.44%
NSW (Regional)............. 469 6.33% 78,565,261 5.94% 167,517 70.36%
NSW (Country).............. 184 2.49% 27,304,641 2.06% 148,395 70.57%
ACT (Metro)................ 109 1.47% 17,256,873 1.30% 158,320 71.24%
ACT (Regional)............. 0 0.00% 0 0.00% 0 0.00%
ACT (Country).............. 0 0.00% 0 0.00% 0 0.00%
VIC (Metro)................ 1,217 16.42% 227,397,825 17.20% 186,851 69.99%
VIC (Regional)............. 59 0.80% 6,044,438 0.46% 102,448 71.08%
VIC (Country).............. 367 4.96% 49,578,440 3.75% 135,091 70.31%
QLD (Metro)................ 518 7.00% 79,564,340 6.02% 153,599 74.48%
QLD (Regional)............. 504 6.81% 75,771,173 5.73% 150,340 73.44%
QLD (Country).............. 57 0.77% 6,481,722 0.49% 113,714 72.60%
SA (Metro)................. 745 10.06% 82,167,301 6.21% 110,292 71.03%
SA (Regional).............. 0 0.00% 0 0.00% 0 0.00%
SA (Country)............... 72 0.97% 7,432,328 0.56% 103,227 72.01%
WA (Metro)................. 0 0.00% 0 0.00% 0 0.00%
WA (Regional).............. 0 0.00% 0 0.00% 0 0.00%
WA (Country)............... 176 2.38% 25,134,592 1.90% 142,810 70.89%
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)................. 6 0.08% 696,157 0.05% 116,026 68.52%
NT (Regional).............. 0 0.00% 0 0.00% 0 0.00%
NT (Country)............... 0 0.00% 0 0.00% 0 0.00%
--------- ------------ ------------- -------- ------- -------
Total................... 7,404 100.00% 1,322,537,613 100.00% 178,625 70.37%
========= ============ ============= ======== ======= =======
HOUSING LOANS BY LOAN SIZE
AVERAGE
NUMBER % OF TOTAL DOLLAR AMOUNT % OF TOTAL BALANCE WGT AVG
OF LOANS NO. OF LOANS A$ A$ AMOUNT A$ LVR%
-------- ------------ ------------- --------- ------- ------
[less than or equal]100,000....................... 2,160 29.18% 115,074,359 8.70% 53,275 49.84%
[greater than]100,000 and [less than or equal]150,000... 1,301 17.56% 164,467,705 12.44% 126,416 66.10%
[greater than]150,000 and [less than or equal]200,000... 1,263 17.06% 220,254,553 16.65% 174,390 69.95%
[greater than]200,000 and [less than or equal]250,000... 867 11.71% 195,153,886 14.76% 225,091 73.10%
[greater than]250,000 and [less than or equal]300,000... 713 9.63% 195,772,159 14.81% 274,575 74.58%
[greater than]300,000 and [less than or equal]350,000... 438 5.91% 141,790,127 10.72% 323,722 74.63%
[greater than]350,000 and [less than or equal]400,000... 273 3.69% 102,154,368 7.72% 374,192 75.76%
[greater than]400,000 and [less than or equal]500,000... 304 4.11% 137,849,762 10.42% 453,453 74.99%
[greater than]500,000 and [less than or equal]750,000... 82 1.11% 47,661,298 3.60% 581,235 70.46%
[greater than]750,000 and [less than or equal]950,000... 3 0.04% 2,359,396 0.18% 786,465 69.76%
[greater than]950,000................................... 0 0.00% 0 0.00% 0 0.00%
-------- ------------ ------------- --------- ------- ------
Total................................................ 7,404 100.00% 1,322,537,613 100.00% 178,625 70.37%
======== ============ ============= ========= ======= ======
48
HOUSING LOANS BY POSTCODE CONCENTRATION -- TOP 10 BY LOAN AMOUNT
AVERAGE
NUMBER % OF TOTAL DOLLAR AMOUNT % OF TOTAL BALANCE WGT AVG
POST CODE OF LOANS NO. OF LOANS A$ A$ AMOUNT A$ LVR%
--------- -------- ------------ ------------- ---------- ------- -------
Liverpool South.. 2170 82 1.11% 16,094,711 1.22% 196,277 74.96%
Cabramatta....... 2166 87 1.18% 14,731,444 1.11% 169,327 75.89%
Manahan.......... 2200 58 0.78% 13,446,761 1.02% 231,841 72.67%
Arndell Park..... 2148 64 0.86% 12,396,901 0.94% 193,702 77.47%
Carnes Hill...... 2171 46 0.62% 11,976,700 0.91% 260,363 69.91%
Bradbury......... 2560 76 1.03% 11,906,148 0.90% 156,660 72.63%
Greystanes....... 2145 48 0.65% 11,485,712 0.87% 239,286 72.24%
Bella Vista...... 2153 51 0.69% 10,673,401 0.81% 209,282 65.18%
Ashcroft......... 2168 52 0.70% 10,386,637 0.79% 199,743 76.99%
Ten Mile Hollow.. 2250 49 0.66% 8,991,535 0.68% 183,501 73.52%
-------- ------------ ------------- ---------- ------- -------
Total......... 614 8.28% 122,089,949 9.23% 199,168 73.31%
======== ============ ============= ========== ======= =======
HOUSING LOANS BY LOAN SEASONING
% OF AVERAGE
NUMBER % OF TOTAL DOLLAR AMOUNT TOTAL A$ BALANCE WGT AVG
OF LOANS NO. OF LOANS A$ AMOUNT A$ LVR%
-------- ------------ -------------- -------- -------- -------
[less than or equal]3 months..................... 6,360 85.91% 1,135,177,409 85.83% 178,487 71.00%
[greater than]3 and [less than or equal]6 months........ 814 10.99% 148,471,523 11.22% 182,397 66.99%
[greater than]6 and [less than or equal]12 months....... 99 1.34% 19,093,438 1.44% 192,863 68.61%
[greater than]12 and [less than or equal]18 months...... 60 0.81% 10,583,251 0.80% 176,388 66.85%
[greater than]18 and [less than or equal]24 months...... 4 0.05% 744,601 0.06% 186,150 53.88%
[greater than]24 and [less than or equal]36 months...... 22 0.30% 2,877,642 0.22% 130,802 50.70%
[greater than]36 and [less than or equal]48 months...... 43 0.58% 5,383,562 0.41% 125,199 57.12%
[greater than]48 and [less than or equal]60 months...... 1 0.01% 94,634 0.01% 94,634 70.10%
[greater than]60 months...................... 1 0.01% 111,553 0.01% 111,553 31.42%
-------- ------------ -------------- -------- -------- -------
Total......................... 7,404 100.00% 1,322,537,613 100.00% 178,625 70.37%
======== ============ ============== ======== ======== =======
HOUSING LOANS BY MATURITY
AVERAGE
NUMBER % OF TOTAL DOLLAR AMOUNT % OF TOTAL BALANCE WGT AVG
OF LOANS NO. OF LOANS A$ A$ AMOUNT A$ LVR%
-------- ------------ ------------- ---------- ------- -------
October 15, 2012... 0 0.00% 0 0.00% 0 0.00%
October 15, 2013... 0 0.00% 0 0.00% 0 0.00%
October 15, 2014... 0 0.00% 0 0.00% 0 0.00%
October 15, 2020... 2 0.03% 97,851 0.01% 48,926 8.82%
October 15, 2022... 8 0.11% 822,776 0.06% 102,847 36.90%
October 15, 2023... 35 0.47% 4,517,039 0.34% 129,058 55.75%
October 15, 2028... 437 5.90% 66,401,085 5.02% 151,948 61.45%
October 15, 2030... 1,507 20.35% 242,766,141 18.36% 161,092 69.42%
October 15, 2031... 5415 73.14% 1,007,932,721 76.21% 186,137 71.28%
October 15, 2032... 0 0.00% 0 0.00% 0 0.00%
-------- ------------ -------------- ---------- -------- -------
Total........... 7,404 100.00% 1,322,537,613 100.00% 178,625 70.37%
======== ============ ============== ========== ======== =======
49
HOUSING LOANS BY MORTGAGE INSURER
% OF TOTAL AVERAGE
NUMBER OF NO. OF DOLLAR AMOUNT % OF TOTAL BALANCE WGT AVG
LOANS LOANS A$ A$ AMOUNT A$ LVR%
--------- ---------- ------------- ---------- ------- -------
Royal & Sun Alliance LMI.... 2,722 36.76% 507,003,558 38.34% 186,261 70.47%
PMI Mortgage Insurance...... 23 0.31% 4,559,321 0.34% 198,231 66.56%
GE Mortgage Insurance....... 4,002 54.06% 687,714,288 52.00% 171,843 70.49%
Commonwealth of Australia... 1 0.01% 34,212 0.00% 34,212 6.98%
PMI Indemnity............... 656 8.86% 123,226,234 9.32% 187,845 69.40%
--------- ---------- -------------- ---------- ------- -------
Total.................... 7,404 100.00% 1,322,537,613 100.00% 178,625 70.37%
========= ========== ============== ========== ======== =======
HOUSING LOANS BY MORTGAGE INSURER AND LVR
ROYAL & SUN ALLIANCE LMI
AVERAGE
NUMBER OF % OF TOTAL DOLLAR AMOUNT % OF TOTAL BALANCE WGT AVG
LOANS NO. OF LOANS A$ A$ AMOUNT A$ LVR%
--------- ------------ ------------- --------- ------- -------
[less than or equal]20%............... 187 6.86% 9,050,427 1.79% 48,398 13.89%
[greater than]20% and [less than or equal]25%..... 60 2.20% 5,547,404 1.09% 92,457 22.69%
[greater than]25% and [less than or equal]30%..... 62 2.28% 6,955,683 1.37% 112,188 27.65%
[greater than]30% and [less than or equal]35%..... 71 2.61% 7,649,739 1.51% 107,743 32.80%
[greater than]35% and [less than or equal]40%..... 87 3.20% 12,129,358 2.39% 139,418 37.66%
[greater than]40% and [less than or equal]45%..... 103 3.78% 14,329,288 2.83% 139,119 42.34%
[greater than]45% and [less than or equal]50%..... 100 3.67% 16,888,934 3.33% 168,889 47.62%
[greater than]50% and [less than or equal]55%..... 87 3.20% 14,558,403 2.87% 167,338 52.92%
[greater than]55% and [less than or equal]60%..... 127 4.67% 22,049,119 4.35% 173,615 57.59%
[greater than]60% and [less than or equal]65%..... 175 6.43% 32,680,256 6.45% 186,744 62.72%
[greater than]65% and [less than or equal]70%..... 167 6.14% 30,909,766 6.10% 185,088 67.49%
[greater than]70% and [less than or equal]75%..... 260 9.55% 59,115,941 11.66% 227,369 73.21%
[greater than]75% and [less than or equal]80%..... 647 23.77% 141,564,726 27.91% 218,802 78.99%
[greater than]80% and [less than or equal]85%..... 231 8.49% 53,719,247 10.60% 232,551 80.87%
[greater than]85% and [less than or equal]90%..... 358 13.15% 79,855,267 15.75% 223,059 89.36%
[greater than]90% and [less than or equal]95%..... 0 0.00% 0 0.00% 0 0.00%
[greater than]95%................ ................ 0 0.00% 0 0.00% 0 0.00%
--------- ------------ ------------- --------- ------- -------
Total.......................................... 2,722 100.00% 507,003,558 100.00% 186,261 70.47%
========= ============ ============= ========= ======= =======
50
HOUSING LOANS BY MORTGAGE INSURER AND LVR
PMI MORTGAGE INSURANCE
AVERAGE
NUMBER OF % OF TOTAL DOLLAR AMOUNT % OF TOTAL BALANCE WGT AVG
LOANS NO. OF LOANS A$ A$ AMOUNT A$ LVR%
--------- ------------ ------------- --------- ------- -------
[less than or equal]20%.............. 2 8.69% 179,070 3.93% 89,535 11.29%
[greater than]20% and [less than or equal]25%.... 1 4.35% 169,127 3.71% 169,127 22.25%
[greater than]25% and [less than or equal]30%.... 1 4.35% 58,969 1.29% 58,969 26.80%
[greater than]30% and [less than or equal]35%.... 1 4.35% 139,912 3.07% 139,912 31.80%
[greater than]35% and [less than or equal]40%.... 0 0.00% 0 0.00% 0 0.00%
[greater than]40% and [less than or equal]45%.... 0 0.00% 0 0.00% 0 0.00%
[greater than]45% and [less than or equal]50%.... 2 8.70% 352,019 7.72% 176,010 48.89%
[greater than]50% and [less than or equal]55%.... 2 8.69% 270,662 5.94% 135,331 53.07%
[greater than]55% and [less than or equal]60%.... 1 4.35% 333,415 7.31% 333,415 57.49%
[greater than]60% and [less than or equal]65%.... 0 0.00% 0 0.00% 0 0.00%
[greater than]65% and [less than or equal]70%.... 0 0.00% 0 0.00% 0 0.00%
[greater than]70% and [less than or equal]75%.... 2 8.70% 424,278 9.31% 212,139 73.87%
[greater than]75% and [less than or equal]80%.... 8 34.78% 1,546,116 33.91% 193,265 78.20%
[greater than]80% and [less than or equal]85%.... 2 8.70% 918,923 20.15% 459,462 80.19%
[greater than]85% and [less than or equal]90%.... 1 4.34% 166,830 3.66% 166,830 89.69%
[greater than]90% and [less than or equal]95%.... 0 0.00% 0 0.00% 0 0.00%
[greater than]95%............... ................ 0 0.00% 0 0.00% 0 0.00%
--------- ------------ ------------- --------- ------- -------
Total......................................... 23 100.00% 4,559,321 100.00% 198,231 66.56%
========= ============ ============= ========= ======== =======
HOUSING LOANS BY MORTGAGE INSURER AND LVR
GE MORTGAGE INSURANCE
AVERAGE
NUMBER OF % OF TOTAL DOLLAR AMOUNT % OF TOTAL BALANCE WGT AVG
LOANS NO. OF LOANS A$ A$ AMOUNT A$ LVR%
--------- ------------ ------------- --------- ------- -------
[less than or equal]20%............... 353 8.82% 14,494,004 2.11% 41,060 13.98%
[greater than]20% and [less than or equal]25%.... 109 2.72% 8,790,009 1.28% 80,642 22.51%
[greater than]25% and [less than or equal]30%.... 99 2.47% 10,161,901 1.48% 102,645 27.57%
[greater than]30% and [less than or equal]35%.... 112 2.80% 13,710,422 1.99% 122,414 32.38%
[greater than]35% and [less than or equal]40%.... 123 3.07% 14,489,784 2.11% 117,803 37.89%
[greater than]40% and [less than or equal]45%.... 131 3.27% 18,848,224 2.74% 143,880 42.67%
[greater than]45% and [less than or equal]50%.... 139 3.47% 21,530,515 3.13% 154,896 47.53%
[greater than]50% and [less than or equal]55%.... 134 3.35% 22,419,354 3.26% 167,309 52.63%
[greater than]55% and [less than or equal]60%.... 159 3.97% 28,363,404 4.12% 178,386 57.73%
[greater than]60% and [less than or equal]65%.... 261 6.52% 44,026,657 6.40% 168,685 62.92%
[greater than]65% and [less than or equal]70%.... 218 5.45% 42,201,899 6.14% 193,587 67.69%
[greater than]70% and [less than or equal]75%.... 301 7.52% 61,248,130 8.91% 203,482 73.10%
[greater than]75% and [less than or equal]80%.... 879 21.97% 181,991,159 26.45% 207,043 78.99%
[greater than]80% and [less than or equal]85%.... 373 9.32% 82,570,884 12.01% 221,370 81.11%
[greater than]85% and [less than or equal]90%.... 611 15.28% 122,867,942 17.87% 201,093 89.38%
[greater than]90% and [less than or equal]95%.... 0 0.00% 0 0.00% 0 0.00%
[greater than]95%................................ 0 0.00% 0 0.00% 0 0.00%
-------- ------------ ------------- --------- ------- ------
Total......................................... 4,002 100.00% 687,714,288 100.00% 171,843 70.49%
======== ============ ============= ========= ======= ======
51
HOUSING LOANS BY MORTGAGE INSURER AND LVR
COMMONWEALTH OF AUSTRALIA
AVERAGE
NUMBER OF % OF TOTAL DOLLAR AMOUNT % OF TOTAL BALANCE WGT AVG
LOANS NO. OF LOANS A$ A$ AMOUNT A$ LVR%
--------- ------------ ------------- --------- -------- -------
[less than or equal]20%............. 1 100.00% 34,212 100.00% 34,212 6.98%
[greater than]20% and [less than or equal]25%... 0 0.00% 0 0.00% 0 0.00%
[greater than]25% and [less than or equal]30%... 0 0.00% 0 0.00% 0 0.00%
[greater than]30% and [less than or equal]35%... 0 0.00% 0 0.00% 0 0.00%
[greater than]35% and [less than or equal]40%... 0 0.00% 0 0.00% 0 0.00%
[greater than]40% and [less than or equal]45%... 0 0.00% 0 0.00% 0 0.00%
[greater than]45% and [less than or equal]50%... 0 0.00% 0 0.00% 0 0.00%
[greater than]50% and [less than or equal]55%... 0 0.00% 0 0.00% 0 0.00%
[greater than]55% and [less than or equal]60%... 0 0.00% 0 0.00% 0 0.00%
[greater than]60% and [less than or equal]65%... 0 0.00% 0 0.00% 0 0.00%
[greater than]65% and [less than or equal]70%... 0 0.00% 0 0.00% 0 0.00%
[greater than]70% and [less than or equal]75%... 0 0.00% 0 0.00% 0 0.00%
[greater than]75% and [less than or equal]80%... 0 0.00% 0 0.00% 0 0.00%
[greater than]80% and [less than or equal]85%... 0 0.00% 0 0.00% 0 0.00%
[greater than]85% and [less than or equal]90%... 0 0.00% 0 0.00% 0 0.00%
[greater than]90% and [less than or equal]95%... 0 0.00% 0 0.00% 0 0.00%
[greater than]95%............................... 0 0.00% 0 0.00% 0 0.00%
--------- ------------ ------------- --------- -------- -------
Total........................................ 1 100.00% 34,212 100.00% 34,212 6.98%
========== ============ ============= ======== ======= =======
HOUSING LOANS BY MORTGAGE INSURER AND LVR
PMI INDEMNITY
AVERAGE
NUMBER OF % OF TOTAL DOLLAR AMOUNT % OF TOTAL BALANCE WGT AVG
LOANS NO. OF LOANS A$ A$ AMOUNT A$ LVR%
--------- ------------ ------------- --------- -------- -------
[less than or equal]20%........................... 80 12.19% 3,697,972 3.00% 46,225 12.72%
[greater than]20% and [less than or equal]25%..... 21 3.20% 1,783,415 1.45% 84,925 22.14%
[greater than]25% and [less than or equal]30%..... 17 2.59% 2,129,884 1.73% 125,287 26.83%
[greater than]30% and [less than or equal]35%..... 14 2.13% 2,356,949 1.91% 168,354 32.71%
[greater than]35% and [less than or equal]40%..... 18 2.74% 2,766,317 2.24% 153,684 37.78%
[greater than]40% and [less than or equal]45%..... 25 3.81% 3,975,414 3.23% 159,017 42.46%
[greater than]45% and [less than or equal]50%..... 18 2.74% 3,382,207 2.74% 187,900 47.76%
[greater than]50% and [less than or equal]55%..... 14 2.13% 3,055,988 2.48% 218,285 52.65%
[greater than]55% and [less than or equal]60%..... 30 4.57% 5,479,084 4.45% 182,636 57.53%
[greater than]60% and [less than or equal]65%..... 33 5.03% 7,631,297 6.19% 231,251 62.59%
[greater than]65% and [less than or equal]70%..... 36 5.49% 8,873,213 7.20% 246,478 67.57%
[greater than]70% and [less than or equal]75%..... 53 8.08% 13,190,782 10.70% 248,883 72.74%
[greater than]75% and [less than or equal]80%..... 1 27 19.38% 30,966,066 25.14% 243,827 79.10%
[greater than]80% and [less than or equal]85%..... 61 9.30% 12,700,830 10.31% 208,210 81.61%
[greater than]85% and [less than or equal]90%..... 1 09 16.62% 21,236,816 17.23% 194,833 89.33%
[greater than]90% and [less than or equal]95%..... 0 0.00% 0 0.00% 0 0.00%
[greater than]95%................................ 0 0.00% 0 0.00% 0 0.00%
--------- ------------ ------------- --------- -------- -------
Total......................................... 656 100.00% 123,226,234 100.00% 187,845 69.40%
========= ============ ============= ========= ======== =======
52
HOUSING LOANS BY CURRENT COUPON RATES
AVERAGE
NUMBER OF % OF TOTAL DOLLAR AMOUNT % OF TOTAL BALANCE WGT AVG
LOANS NO. OF LOANS A$ A$ AMOUNT A$ LVR%
--------- ------------ ------------- ---------- ------- -------
[less than or equal]5.00.................. 9 0.12% 2,727,951 0.21% 303,106 78.38%
[greater than]5.00% and [less than or equal]5.50%... 42 0.57% 8,121,606 0.61% 193,372 75.15%
[greater than]5.50% and [less than or equal]6.00%... 1,384 18.69% 277,779,707 21.00% 200,708 69.22%
[greater than]6.00% and [less than or equal]6.50%... 3,117 42.10% 583,299,235 44.10% 187,135 73.44%
[greater than]6.50% and [less than or equal]7.00%... 954 12.88% 131,141,379 9.92% 137,465 69.30%
[greater than]7.00% and [less than or equal]7.50%... 1,277 17.25% 229,054,639 17.32% 179,369 65.47%
[greater than]7.50% and [less than or equal]8.00%... 483 6.52% 67,555,567 5.11% 139,867 66.37%
[greater than]8.00% and [less than or equal]8.50%... 80 1.08% 13,052,603 0.99% 163,158 72.30%
[greater than]8.50% and [less than or equal]9.00%... 11 0.15% 2,355,15 0.18% 214,105 65.53%
[greater than]9.00%................................. 47 0.63% 7,449,774 0.56% 158,506 67.68%
--------- ------------ ------------- ---------- ------- -------
Total................ ........................... 7,404 100.00% 1,322,537,613 100.00% 178,625 70.37%
========= ============ ============= ========== ======= =======
HOUSING LOANS BY MONTHS REMAINING TO MATURITY
% OF AVERAGE
NUMBER OF % OF TOTAL DOLLAR AMOUNT TOTAL A$ BALANCE WGT AVG
LOANS NO. OF LOANS A$ AMOUNT A$ LVR%
--------- ------------ ------------- -------- -------- -------
[less than or equal]144 months................. 0 0.00% 0 0.00% 0 0.00%
[greater than]144 and [less than or equal]156 months...... 0 0.00% 0 0.00% 0 0.00%
[greater than]156 and [less than or equal]168 months...... 0 0.00% 0 0.00% 0 0.00%
[greater than]168 and [less than or equal]180 months...... 0 0.00% 0 0.00% 0 0.00%
[greater than]180 and [less than or equal]192 months...... 0 0.00% 0 0.00% 0 0.00%
[greater than]192 and [less than or equal]204 months...... 0 0.00% 0 0.00% 0 0.00%
[greater than]204 and [less than or equal]216 months...... 2 0.03% 97,851 0.01% 48,926 8.82%
[greater than]216 and [less than or equal]228 months...... 0 0.00% 0 0.00% 0 0.00%
[greater than]228 and [less than or equal]240 months...... 8 0.11% 822,775 0.06% 102,847 36.90%
[greater than]240 and [less than or equal]252 months...... 35 0.47% 4,517,039 0.34% 129,058 55.75%
[greater than]252 and [less than or equal]264 months...... 0 0.00% 0 0.00% 0 0.00%
[greater than]264 and [less than or equal]276 months...... 0 0.00% 0 0.00% 0 0.00%
[greater than]276 and [less than or equal]288 months...... 0 0.00% 0 0.00% 0 0.00%
[greater than]288 and [less than or equal]300 months...... 0 0.00% 0 0.00% 0 0.00%
[greater than]300 and [less than or equal]312 months...... 437 5.90% 66,401,086 5.02% 151,948 61.45%
[greater than]312 and [less than or equal]324 months...... 0 0.00% 0 0.00% 0 0.00%
[greater than]324 and [less than or equal]336 months...... 1,507 20.35% 242,766,141 18.36% 161,092 69.42%
[greater than]336 and [less than or equal]348 months...... 5,415 73.14% 1,007,932,721 76.21% 186,137 71.28%
[greater than]348 and [less than or equal]360 months...... 0 0.00% 0 0.00% 0 0.00%
[greater than]360 months................... 0 0.00% 0 0.00% 0 0.00%
--------- ------------ ------------- -------- -------- -------
Total....................... 7,404 100.00% 1,322,537,613 100.00% 178,625 70.37%
========= ============ ============= ======== ======== =======
53
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.
54
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 "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
55
claim. Full details of the mortgage insurance companies and their respective
ratings are set out separately in this prospectus.
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.
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
Access Account (P&I) loans 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
Access Account fixed for a specific initial period 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
Access Account repayments 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
Access Account repayments 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"
56
loans with an interest rate variable at the
discretion of the servicer.
Interstar "Line of Amortizing line of credit "P&I" loans with an
Credit" interest rate variable at the discretion of
Access Account 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.
Interstar "Split" A combined facility which:
Access Account
o as to a specified Australian 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 Australian 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 trust manager in its absolute
discretion, and subject to the trust manager 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;
57
o after allowing for all payments which the issuer trustee is then
required to make or which the trust manager 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 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
58
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 OF THE HOUSING LOANS
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.
59
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;
60
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.
61
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 monoline insurer to provide mortgage lenders
with protection against loss arising from borrower default on residential
mortgages. As of December 31, 2001, PMI Indemnity Limited 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 ceased,
except for increased advances on current insurance in force, writing new
business on July 1, 2002. Insurance in force as at July 1, 2002 will be
maintained.
62
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. As of December 31, 2001, 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. which in turn is a subsidiary of The
PMI Group Inc. PMI Mortgage Insurance Co. is a leading monoline mortgage insurer
in the United States currently has a financial strength rating of AA+ by S&P and
Fitch and Aa2 by Moody's.
As of December 31, 2001, PMI had total assets of A$434 million,
shareholders' equity of A$226.4 million and statutory reserves -- claims
equalization reserve -- of A$66 million. PMI 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 LTD 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 Australian 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 Australian
Commonwealth Government;
o appointed a new corporation, Housing Loans Insurance Corporation
Ltd, 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, 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,
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
63
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.
As of December 31, 2001, GE Mortgage Insurance Pty Ltd had total assets
of A$212.5 million, shareholders' equity of A$94.7 million and statutory
reserves -- claims equalization reserve -- of A$19.8 million. GE Mortgage
Insurance Pty Ltd currently has a claims paying ability rating of AAA by S&P and
Fitch and Aa1 by Moody's.
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 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, 2001, 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 A+ "developing" by S&P, A+ "evolving" by Fitch
and A2 "uncertain" by Moody's.
The business address of Royal & Sun Alliance Lenders Mortgage Insurance
Limited is 465 Victoria Avenue, Chatswood, New South Wales, Australia.]
64
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.
65
The policy also continues to provide protection if:
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;
66
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
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
[First American Title Insurance Company of Australia Pty Limited is a
subsidiary of First American Title Insurance Company, a specialist title insurer
and a diversified provider of business information and related products and
services in the United States.
First American Title Insurance Company was founded over 113 years ago
with revenues of US$3.75 billion and approximately 22,597 employees worldwide in
2001. First American Title Insurance Company is publicly traded on the New York
Stock Exchange through its holding company, the First American Financial
Corporation.
A.M. Best Company, an insurance company ratings and information agency,
affirmed in 2002 the current rating for First American Title Insurance Company
of Australia Pty Limited of A+ (Superior). A.M. Best Company evaluates title
insurers from both an insurance and general industry perspective.
First American Title Insurance Company and First American Financial
Corporation have a rating of "A-" from S&P. First American Financial
Corporation's senior debt is rated "stable" by S&P.]
67
DESCRIPTION OF THE US$ NOTES
GENERAL
The issuer trustee will issue the US$ 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 US$ notes.
The summary does not purport to be complete and is subject to the terms and
conditions of the transaction documents, the fixed-floating rate swap and the
currency swaps.
FORM OF THE US$ NOTES
BOOK-ENTRY REGISTRATION
The US$ notes will be issued only in registered book-entry form in
minimum denominations of US$100,000 and multiples of US$1,000 in excess of that
amount. Unless definitive notes are issued, all references to actions by the US$
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 US$
noteholders will refer to distributions, notices, reports and statements to DTC
or its nominee, as the registered noteholder, for distribution to owners of the
US$ notes in accordance with DTC's procedures.
US$ 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 US$ 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).
68
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's 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's 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 US$ notes held through the DTC system must be made by or
through DTC participants, which will receive a credit for the US$ notes on DTC's
records. The ownership interest of each actual US$ noteholder is in turn to be
recorded on the DTC participants' and indirect participants' records. US$
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 US$ notes
are to be accomplished by entries made on the
69
books of DTC participants acting on behalf of the US$ noteholders. US$
noteholders will not receive definitive notes representing their ownership
interest in US$ notes unless use of the book-entry system for the US$ 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 US$ notes; DTC's records reflect only the identity of the
DTC participants to whose accounts the US$ notes are credited, which may or may
not be the actual beneficial owners of the US$ 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 US$ 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 US$ notes are
credited on the record date, identified in a listing attached to the proxy.
Principal and interest payments on the US$ 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 US$ noteholders. These payments will be the responsibility of
the DTC participant and not of DTC, the issuer trustee, the note trustee or the
principal 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
US$ 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, Luxembourg
participants through electronic book-entry changes in accounts of Clearstream,
70
Luxembourg participants, thereby eliminating the need for physical movement of
notes. Transactions may be settled in Clearstream, Luxembourg in any of 31
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 32
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 US$ 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 US$ 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 US$ notes among
participants of DTC, Clearstream,
71
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". US$ 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 US$ 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 US$ 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 US$ 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. The note registrar 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.
A definitive note may be transferred in whole or in part in an
authorized denomination upon the surrender of the definitive note, at the office
of the note registrar together with the form of transfer endorsed on it duly
completed and executed.
The note registrar shall not 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;
o amounts received under the fixed-floating rate swap and the
currency swaps;
72
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, to the owners of record of the US$ notes as of the date which is 4
business days prior to that quarterly payment date if the US$ notes are held in
book-entry form, or, if the US$ notes are held in definitive form, the last day
of the prior calendar month. Payments on the definitive notes will be made to
the US$ noteholder of record by US$ check drawn on a bank in New York City and
either mailed to the address of the US$ noteholder shown on the register as of
4:00 pm Melbourne time on the date that is four business days before the
quarterly payment date or transferred to a US$ account maintained by the US$
noteholder with a bank in New York City.
73
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 6 business days before the date that is one calendar month
preceding that monthly payment date to, but excluding, the date which is 6
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 March 12, 2003.
o last: period from and including the date which is 6 business days
before the monthly payment date immediately prior to the final
monthly payment date to and excluding the day which is 6 business
days before that final monthly payment date.
INTEREST PERIOD................................. with respect to the Class A2 A$ Interest Amount, the Class B1 A$ Interest
Amount, the Class A1 notes and the Class B2 notes, each period from and
including a monthly payment date to and excluding the next monthly payment
date. However, the first and last Interest Periods for each of the Class A2 A$
Interest Amount, the Class B1 A$ Interest Amount, the Class A1 notes and the
Class B2 notes are as follows:
o first: period from and including the closing 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 the relevant note is so
redeemed.
with respect to each US$ note, each period from and including a
quarterly payment date to and excluding the next quarterly
payment date. However, the first and last Interest Periods for
each of the US$ notes
74
are as follows:
o first: period from and including the closing date to 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
that 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 or quarterly payment date, the date which is 4
business days before that monthly or quarterly payment date.
QUARTERLY PAYMENT DATE.......................... the 20th day or, if the 20th day is not a business day, then the next business
day of each of [February, May, August and November]. The first quarterly
payment date will be in [May 2003].
MONTHLY PAYMENT DATE............................ the 20th day or, or if the 20th day is not a business day, then the next
business day of each calendar month. The first monthly payment date will be in
[March 2003].
EXAMPLE CALENDAR
The following example calendar for a quarter assumes that all relevant days are
business days.
COLLECTION PERIOD............................... February 14th to March 13th
MONTHLY INTEREST PERIOD......................... February 20th to March 19th
DETERMINATION DATE.............................. March 16th
MONTHLY PAYMENT DATE............................ March 20th
COLLECTION PERIOD............................... March 14th to April 13th
MONTHLY INTEREST PERIOD......................... March 20th to April 19th
DETERMINATION DATE.............................. April 16th
MONTHLY PAYMENT DATE............................ April 20th
COLLECTION PERIOD............................... April 14th to May 13th
75
MONTHLY INTEREST PERIOD......................... April 20th to May 19th
DETERMINATION DATE.............................. May 16th
QUARTERLY INTEREST PERIOD....................... February 20th to May 19th
MONTHLY PAYMENT DATE/
QUARTERLY PAYMENT DATE......................... May 20th
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 any
fixed-floating rate swap and the currency swaps;
o interest on income and any other monies 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 MORTGAGE PRINCIPAL REPAYMENTS AND LIQUID AUTHORIZED
INVESTMENTS TO AVAILABLE INCOME
The trust manager must ensure that, subject to the paragraph below, the
trust will at all times have Liquid Authorized Investments at any time not less
than 1% or such other percentage as determined by the trust manager and
confirmed by each rating agency of the sum of the Class A2 A$ Equivalent of the
outstanding principal amount of the Class A2 notes, the Class B1 A$ Equivalent
of the outstanding principal amount of the Class B1 notes, the outstanding
principal amount of any Class A1 notes and the outstanding principal amount of
the Class B2 notes. Such amount shall be known as the PRESCRIBED MINIMUM LEVEL.
At closing, the Liquid Authorized Investments will be acquired with the net
proceeds from the sale of the notes and will, to the extent necessary, be
replenished on each monthly payment date with Mortgage Principal Repayments to
the extent they are available as described below under "-- Principal
Distributions".
76
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, Mortgage Principal Repayments, to cover
such INCOME SHORTFALL to the extent available.
Income received during a Collection Period and any Mortgage Principal
Repayments and Liquid Authorized Investments applied as described above will
constitute AVAILABLE INCOME.
DISTRIBUTION OF AVAILABLE INCOME
On each monthly payment date prior to the enforcement of the security
trust deed, 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 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, the trust manager and the servicer -- 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, the trust manager and the servicer --
which the trust manager or the issuer trustee reasonably
anticipates will be incurred prior to the next monthly
payment date;
77
o the expenses of the trust -- other than any fees payable to
the issuer trustee, the note trustee, the paying agents, the
calculation agent, the trust manager and the servicer -- 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, pro rata:
o the trust manager's fee for the Collection Period;
and
o the servicer's fee for the Collection Period;
o fifth, pro rata:
o any amounts payable to the fixed-floating rate
swap provider under each fixed-floating rate swap
other than any break costs in respect of the
termination of a fixed-floating rate swap;
o interest on any Class A1 notes for the Interest
Period ending on that monthly payment date to the
Class A1 noteholders;
o (1) the Class A2 A$ Interest Amount for that
monthly payment date, 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 Class A2
currency swap, an A$ amount the trust manager
determines in good faith to be applied on that
monthly payment date in order to enable the issuer
trustee to meet its obligations to pay interest on
the Class A2 notes on the related quarterly
payment date, 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 to the currency swap provider, any break costs
payable to the currency swap provider under the
Class A2 currency swap other than in respect of
the termination of the Class A2 currency swap
where the currency swap provider is the defaulting
party, as such term is defined in the Class A2
currency swap;
o sixth, pro rata and according to the amount of interest payable
to each class:
o (1) the Class B1 A$ Interest Amount for that
monthly payment date, 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 B1 notes
on the related quarterly payment date, and (2) in
the event of the termination of the Class B1
currency swap,
78
an A$ amount the trust manager determines in
good faith to be applied on that monthly payment
date in order to enable the issuer trustee to
meet its obligations to pay interest on the
Class B1 notes on the related quarterly payment
date, 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 B1 notes on the related
quarterly payment date;
o interest on the Class B2 notes for the Interest
Period ending on that monthly payment date to
the Class B2 noteholders; and
o to the currency swap provider, any break costs
payable to the currency swap provider under the
Class B1 currency swap other than in respect of
the termination of the Class B1 currency swap
where the currency swap provider is the
defaulting party, as such term is defined in the
Class B1 currency swap.
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 prior to the enforcement of the security
trust deed, 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 the following amounts in the following order of priority:
o first, to be applied by the issuer trustee as Mortgage Principal
Repayments for the corresponding Collection Period, of an amount
equal to all amounts previously applied under the first bullet
point under the heading "--Principal Distributions", to the
extent not previously so replenished.
o second, to reduce the Aggregate Principal Loss Amount for the
corresponding Collection Period.
o third, to reduce any Carryover Charge-offs that have not been
reduced on prior monthly payment dates.
o fourth, pro rata any break costs to:
o the fixed-floating rate swap provider in respect of the
termination of any fixed-floating swap; and
79
o the currency swap provider in respect of the termination of
a currency swap where the currency swap provider is the
defaulting party, as such term is defined in the relevant
currency swap;
o fifth, pro rata any fees payable to the sellers; and
o sixth, pro rata the balance, if any, to each holder of a residual
income unit.
The issuer trustee shall only make a payment described in the bullet
points in this section to the extent that any Income remains from which to make
the payment after amounts with priority to that payment have been fully paid.
The aggregate amount of Income applied on a monthly payment date under the
second and third bullet points above is called the RECOVERY AMOUNT for that
monthly payment date and will be applied to make principal payments on the notes
as described below under "-- Principal Distributions."
INTEREST ON THE NOTES
CALCULATION OF INTEREST PAYABLE ON THE NOTES
Up to, and including, the Step-Up Margin Date, the interest rate for
each class of US$ notes for the related Interest Period will be equal to LIBOR
on the related rate reset date plus a margin of [___________] in respect of the
Class A2 notes and a margin of [_______] in respect of the Class B1 notes. If
the issuer trustee has not redeemed all of either class of the US$ notes by the
Step-Up Margin Date then the interest rate for each related Interest Period
commencing on or after that date for such class of US$ Note will be equal to
LIBOR on the related rate reset date plus a margin of [___________] in respect
of the Class A2 notes and a margin of [___________] in respect of the Class B1
notes.
The STEP-UP MARGIN DATE means the quarterly payment date falling in
February 2010.
Up to, and including, the Step-Up Margin Date, the interest rate for
the Class B2 notes for a particular Interest 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 B2 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
date the Class A1 notes are issued. 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
80
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 US$ notes, or 365 days for the Class A2 A$
Interest Amount, the Class B1 A$ Interest Amount, 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 the 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.
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.
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;
o any other amount which, under the first bullet point under the
heading "--Additional Income Payments" or the balance of the
Prefunding Account on the first quarterly payment date after the
closing date, is to be treated as a Mortgage Principal Payment
received by the issuer trustee during that Collection Period; 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.
PRINCIPAL DISTRIBUTIONS
On each monthly payment date prior to the enforcement of the security
trust deed, in accordance with the calculations, instructions and directions
provided to it by the trust manager
81
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, any Liquid Authorized Investments and any
Recovery Amounts for the corresponding monthly payment date, the following
amounts in the following order of priority:
o first, to make up any Income Shortfall. See "-- Application of
Mortgage Principal Repayments and Liquid Authorized Investments
to Available Income" above;
o second, to replenish Liquid Authorized Investments (after giving
effect to the use of Liquid Authorized Investments to cure any
Income Shortfall pursuant to the bullet point above) until the
value of Liquid Authorized Investments equals the Prescribed
Minimum Level.
o third, subject to the Prescribed Minimum Level of Liquid
Authorized Investments, 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 fourth, subject to the Prescribed Minimum Level of Liquid
Authorized Investments,
o if the Threshold Requirements have been met on the monthly
payment date, pro rata:
o (1) prior to the termination of the Class A2
currency swap, to the currency swap provider
the Class A2 A$ Equivalent of the Class A2
Currency Swap Notional Amount for the 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 Class A2 currency
swap, to the note trustee for purchase of
U.S. dollars at the spot exchange rate in New
York City, to be applied towards payment of
the Principal Amount of the Class A2 notes on
the related quarterly payment date;
o (1) prior to the termination of the Class B1
currency swap, to the currency swap provider
the Class B1 A$ Equivalent of the Class B1
Currency Swap Notional Amount for the 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 B1 notes on the related
quarterly payment date, and (2) in the event
of the termination of the Class B1 currency
swap, to the note trustee for purchase of
U.S. dollars at the spot exchange rate in New
York City, to be applied towards payment of
the Principal Amount of the Class B1 notes on
the related quarterly payment date;
82
o to the Class B2 noteholders in payment of the
Principal Amount of the Class B2 notes; or
o if the Threshold Requirements have not been met on the monthly
payment date, in the following order of priority:
o (1) prior to the termination of the Class A2 currency
swap, to the currency swap provider the Class A2 A$
Equivalent of the Class A2 Currency Swap Notional
Amount for the 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
Class A2 currency swap, to the note trustee for
purchase of U.S. dollars at the spot exchange rate in
New York City, 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 the Class A2 notes have been redeemed in full;
o pro rata:
o (1) prior to the termination the Class B1
currency swap, to the currency swap provider
of the Class B1 A$ Equivalent of the Class B1
Currency Swap Notional Amount for the 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 B1 notes on the related
quarterly payment date, and (2) in the event
of the termination of the Class B1 currency
swap, to the note trustee for purchase of
U.S. dollars at the spot exchange rate in New
York City, to be applied towards payment of
the Principal Amount of the Class B1 notes on
the related quarterly payment date, in each
case until such time as all Class B1 notes
have been redeemed in full;
o to the Class B2 noteholders in payment of the
Principal Amount of the Class B2 notes until
such time as the Class B2 notes have been
redeemed in full; and
o fifth, the balance, if any, as a distribution pro rata, to each
holder of a residual income unit.
The issuer trustee, pursuant to the directions provided by the trust
manager, will only make a payment described in any of the preceding bullet
points above in this section to the extent that any Mortgage Principal
Repayments and Recovery Amounts remain from which to make the payment after
amounts with priority to that payment have been fully paid. The issuer trustee
will only use Liquid Authorized Investments in the third, fourth and fifth
bullet points above to the extent that the application of Liquid Authorized
Investments will not reduce the value of Liquid Authorized Investments to less
than the Prescribed Minimum Level.
83
The THRESHOLD REQUIREMENTS will be met if each of the following
conditions are satisfied:
o there are no Carryover Charge-offs;
o no more than 5% of the housing loans (by unpaid principal
balance) are in arrears by an amount equal to two or more monthly
payments at the time; an
o an amount equal to the aggregate of:
o the Class B1 A$ Equivalent of the Principal Amount of all
Class B1 notes outstanding; plus
o the Principal Amount of all Class B2 notes outstanding at
the time;
o is not less than 0.25%of the amount equal to the aggregate of:
o the Initial Principal Amount of all Class B2 notes on the
closing date; plus
o the Class A2 A$ Equivalent of the Initial Principal Amount
of all Class A2 notes on the closing date; plus
o the Class B1 A$ Equivalent of the Initial Principal Amount
of all Class B1 notes on the closing date.
LIQUIDITY PURPOSES include:
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; and
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.
CHARGE-OFFS
If, on any monthly payment date, the Aggregate Principal Loss Amount for
the related Collection Period exceeds the amount allocated or available for
allocation on that monthly payment date under the second bullet point under
the heading "--Additional Income Payments", the amount of the excess will
be the CHARGE-OFF for that monthly payment date. The trust manager will
notify the issuer trustee and the note trustee of the amount of any
Charge-offs for any monthly payment date. The total of the Charge-offs from
prior monthly payment dates that have not been reduced from Income as
described above under "--Additional Income Payments" are called CARRYOVER
CHARGE-OFFS.
84
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 swaps 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 swaps, 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 and the Class B1 notes;
o principal on the Class A2 notes and the Class B1 notes, until
their outstanding principal balance is reduced to zero.
NOTICES
Where the note trust deed provides for notice to US$ noteholders of any
event, such notice shall be sufficiently given, unless otherwise provided by law
or otherwise expressly stated in the note trust deed, for so long as the US$
notes are listed on the Australian Stock Exchange if published in a leading
newspaper having general circulation in Australia. This notice will be deemed to
be 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 -- and the Principal Amount of the US$ notes after giving
effect to such payment, 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.
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
85
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. Such fixed-floating rate swaps 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.
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 the second
bullet point 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 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
86
o 1% of the aggregate Principal Amount of the notes - or as
applicable the Australian dollar equivalent - 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 business days after notice of
failure is given to the issuer trustee by 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; or
o an event of default has occurred and the security trustee has
exercised its rights to enforce the charge under the security
trust deed.
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 the fixed-floating rate swap within 10 business days after
notice of failure is given to the fixed-floating rate swap
provider by 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; or
o an Insolvency Event has occurred with respect to the
fixed-floating rate swap provider.
THE CURRENCY SWAPS
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 US$ notes are denominated in U.S. dollars and the
US$ notes bear interest at a rate calculated by reference to LIBOR. The issuer
trustee will enter into the Class A2 currency swap to hedge its interest rate
and currency exposure in relation to the Class A2 notes and the Class B1
currency swap to hedge its interest
87
rate and currency exposure in relation to the Class B1 notes. The currency swaps
will be governed by the laws of England and Wales.
The Class A2 currency swap and the Class B1 currency swap will both be
governed by a standard form ISDA Master Agreement, as amended by their
respective supplementary schedules and confirmed by separate written
confirmations relating to the Class A2 notes and the Class B1 notes,
respectively.
Under the Class A2 currency swap and the Class B1 currency swap, the
issuer trustee will pay to the currency swap provider on each monthly payment
date an amount in Australian dollars equal to the lesser of (1) the Mortgage
Principal Repayments -- except to the extent applied or retained for Liquidity
Purposes -- any available Liquid Authorized Investments and Recovery Amounts
remaining after making the distributions to make up any Income Shortfalls or to
pay principal on the Class A1 notes, if any -- see "--Principal Distributions"
above -- and (2) (a) the Class A2 A$ Equivalent of the Class A2 Currency Swap
Notional Amount with respect to the Class A2 currency swap, or (b) the Class B1
A$ Equivalent of the Class B1 Currency Swap Notional Amount with respect to the
Class B1 currency swap for that monthly payment date. The currency swap provider
will pay directly to the US$ account of the principal paying agent on the
related quarterly payment date an amount denominated in United States dollars
which is equivalent to such Australian dollar payment. Under the Class A2
currency swap, the equivalent United States dollar payment will be calculated
using an exchange rate of US$[__] = A$1.00. Under the Class B1 currency swap,
the equivalent United States dollar payment will be calculated using an exchange
rate of US$[__] = A$1.00. Both exchange rates will be fixed for the term of the
currency swaps.
In addition, under the Class A2 currency swap and the Class B1 currency
swap on each monthly payment date the issuer trustee will pay to the currency
swap provider the Class A2 A$ Interest Amount and the Class B1 A$ Interest
Amount, respectively, for that monthly payment date. The currency swap provider
will pay directly to the US$ account of the principal paying agent on the
related quarterly payment date an amount equal to the interest payable in US$ to
the US$ noteholders. The currency swap provider will be required to gross-up
payments to the principal paying agent in respect of any withholding taxes
levied on payments by it under a currency swap. However, the issuer trustee will
not be required to pay grossed-up amounts to the currency swap provider under a
currency swap.
If on any monthly payment date the issuer trustee does not or is unable
to make the full floating rate payment under a currency swap, 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 US$ notes will be paid by investors in U.S.
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 US$ notes in U.S. dollars. In return the issuer
trustee will be paid by the currency swap provider the Class A2 A$ Equivalent
and the Class B1 A$ Equivalent, as applicable, of that U.S. dollar amount.
88
TERMINATION BY THE CURRENCY SWAP PROVIDER
With respect to each of the Class A2 currency swap and the Class B1
currency swap, the currency swap provider shall have the right to terminate such
currency swap in the following circumstances:
o if the issuer trustee fails to make a payment under the relevant
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 relevant 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 relevant currency swap. Each of the currency
swaps 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 relevant 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 notes or in respect of payments under
the relevant 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 notes are redeemed as a
result. See "-- Redemption of Notes for Taxation or Other
Reasons" below; or
o an event of default has occurred and the security trustee has
exercised its rights to enforce the charge under the security
trust deed.
TERMINATION BY THE ISSUER TRUSTEE
There are a number of circumstances in which the issuer trustee has the
right to terminate the Class A2 currency swap or the Class B1 currency swap. In
each of these cases and with respect to each of the currency swaps 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 relevant currency swap within ten business days of its due
date or the currency swap provider becomes insolvent or merges
into another entity without that entity properly assuming
responsibility for the obligations of the currency swap provider
under such 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 relevant currency swap.
89
Each of the currency swaps 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 notes or in respect of payments under
the relevant 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 notes are redeemed as a
result. See "-- Redemption of Notes for Taxation or Other
Reasons" below; or
o 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 relevant currency swap.
The issuer trustee may only terminate a relevant currency swap with the
prior written consent of the note trustee. Each party may terminate a relevant
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 provider does not have: (1) 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 with respect to the Class A2 currency swap, or (2) a short term credit
rating of [__] and a long-term credit rating of at least [__] by Moody's with
respect to the Class B1 currency swap provider, the currency swap provider must
within:
o 30 business days of a downgrade of the currency swap provider's:
(1) 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 with respect to the Class A2 currency swap and (2) [long
term credit/short term credit] rating by Moody's to not lower
than [__] with respect to the Class B1 currency swap; 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:
o in the situation described in the first bullet point above only,
(A) deposit and maintain in the swap collateral account, which
will be a US$ account with an Approved Bank in the name of the
issuer trustee, sufficient funds to ensure that the amount on
deposit
90
in such account is not less than the full amount owed by the
currency swap provider as set forth in the relevant currency
swap, or (B) acquire in the name of or transfer to the issuer
trustee eligible investments which will mature on or prior to the
next quarterly payment date with an aggregate face amount equal
to the full amount owed by the currency swap provider as set
forth in the currency swap; or
o in the situation described in the second bullet point above,:
o procure a novation of the rights and obligations of the
currency swap provider under the currency swap to a
replacement currency swap provider with a credit rating not
less than:
o A-1+ (short term) and AA- (long term) from S&P and
P-1 (short term) and A2 (long term) from Moody's
with respect to the Class A2 currency swap; or
o [ ] (long term/short term) from Moody's with
respect to the Class B1 currency swap; 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 notes,
and until such time as a replacement currency swap has been entered
into in accordance with the 2 bullet points above, the currency swap
provider shall deposit such amounts in the swap collateral account or
acquire in the name of or transfer to the issuer trustee eligible
investments as set forth in clauses (A) and (B) of the sixth preceding
bullet point.
If, at any time, the currency swap provider's obligations under the
Class A2 currency swap or the Class B1 currency swap are novated or the currency
swap provider is otherwise replaced as currency swap provider, the currency swap
provider shall be immediately entitled to any cash which it has deposited in the
swap collateral account pursuant to such currency swap.
The issuer trustee, at the direction of the trust manager, may only
invest amounts on deposit in a swap collateral account in eligible investments
that will mature on or before the next quarterly payment date. All accrued
interest or any other income derived from the acquisition or transfer of any
eligible investments or any amounts on deposit in a swap collateral account will
be payable monthly to the party providing such eligible investments or who has
deposited such amount in the swap collateral account. Such amounts will only be
payable to such party to the extent that the payment will not reduce the balance
of the swap collateral account to an amount less than the required amount set
forth in the relevant currency swap.
TERMINATION PAYMENTS
On the date of termination of the Class A2 currency swap or the Class
B1 currency swap, a termination payment will be due from the issuer trustee to
the currency swap provider or from
91
the currency swap provider to the issuer trustee. The termination of a 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 relevant currency swap.
REPLACEMENT OF A CURRENCY SWAP
If the Class A2 currency swap or the Class B1 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 such currency
swap, but only on the condition 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 such currency swap;
o the then current ratings assigned to the notes by either rating
agency will not be withdrawn or downgraded; and
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 [Barclays Bank PLC].
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
92
o the swap provider must deposit the cash collateral in the swap
collateral account.
The issuer trustee may only make withdrawals from a 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.
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 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 a
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
93
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 a 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.
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, the Class B1 notes or the Class B2 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, 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".
94
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 February 2010 quarterly payment date, provided that:
o the trust manager has provided to:
o each relevant noteholder, in accordance with the notice
provisions set forth under the heading "--Notices", 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:
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:
95
o the trust manager has provided to:
o each noteholder, in accordance with the notice provisions
set forth under the heading "--Notices", 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. The final
maturity date for the notes is the quarterly payment date falling in July 2035.
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 Principal Amount 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;
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 is repaid in
accordance with "-- Principal Distributions" described above;
96
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.
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
97
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 monthly payment date, the trust manager will, in respect of the
Collection Period ending before that monthly payment date, deliver to the
principal paying agent and the note trustee a noteholders' report containing the
following information:
o the aggregate Principal Amount of each class of notes as at the
first day after the monthly payment date occurring during that
Collection Period;
o the aggregate amount of interest payable on each class of notes
on the corresponding monthly payment date, if any,;
o the aggregate of all principal payments to be made in respect of
each class of notes on the corresponding monthly payment date, if
any,;
o the Income for the Collection Period;
o the Mortgage Principal Repayments for the Collection Period;
o the expenses of the trust for the Collection Period;
o the aggregate of all redraws on the housing loans made during the
Collection Period;
o the interest rate for the Class A2 notes for the interest period
ending on the day before the next quarterly payment date;
o the interest rate for the Class B1 notes for the interest period
ending on the day before the next quarterly payment date;
o the scheduled and unscheduled payments of principal on the
housing loans during the Collection Period;
o the aggregate of the outstanding balances of the housing loans as
at the last day of the Collection Period; and
98
o the Charge-off and Carryover Charge-offs, if any, for the
corresponding monthly payment date;
o the Recovery Amount for the corresponding monthly payment date,
if any,;
o delinquency and loss statistics with respect to the housing loans
during the Collection Period.
Unless and until definitive notes are issued, beneficial owners will
receive noteholders' 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, quarterly and annual
unaudited reports containing information concerning the trust and the US$ 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 US$ 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 US$ notes are in book-entry form. Upon the issuance of fully
registered, definitive notes, such reports will be sent directly to each US$
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 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 trust
manager expects that the obligation to file such reports will be terminated
following the end of June 2004.
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 US$ 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 US$ notes.
99
DESCRIPTION OF THE TRANSACTION DOCUMENTS
The following summary, together with the information above under the
heading "Description of the US$ Notes", describes the material terms of the
master trust deed, the series notice, the note trust deed, the security trust
deed, the agency agreement, the investment management agreement, the primary
backup servicer agreement and the secondary backup servicer agreement,
collectively called 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, the primary backup
servicer agreement and the secondary backup servicer agreement, are governed by
the laws of the State of New South Wales, Australia. The note trust deed is
governed by the laws of the State of New South Wales, Australia and the
administration of the trust is governed by New York law. The primary backup
servicer agreement and the secondary backup servicer agreement are governed by
the laws of the State of Victoria, Australia. 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, 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 US$ 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;
100
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
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, any fixed floating rate swap
and the currency swaps.
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.
101
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, as amended, 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, any fixed floating rate swap and the
currency swaps, has been made under supervision of the person
signing the certificate; and
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, any fixed floating
rate swap and the currency swaps, 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 [0.055% 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.
Each of 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, except to
the extent that such liability, cost or expense is caused by the fraud,
negligence or willful 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.
102
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.
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, any
fixed-floating rate swap and the currency swaps, 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, any
fixed-floating rate swap and the currency swaps, 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, any fixed-floating rate swap and the currency
swaps, 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, any
fixed-floating rate swap and the currency swaps, or the trust.
No noteholder nor any party to any transaction document, any
fixed-floating rate swap and the currency swaps, 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, any fixed-floating rate swap and the currency
swaps, 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 willful default.
103
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, any fixed-floating rate swap and the currency swaps, 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, any fixed-floating
rate swap and the currency swaps -- 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, any fixed-floating rate swap and a currency swap --
regardless of whether or not that act or omission is purported to be done on
behalf of the issuer trustee.
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,
any fixed-floating rate swap and the currency swaps 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.
104
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 associates officers, or employees 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 any such delegation or appointment, Interstar
Securitisation Management Pty Limited will continue to be liable for the acts
and omissions of any such associates, officers, employees, attorneys, agents,
delegates or subcontractors in respect of the performance of the trust manager's
obligations under and in connection with the transaction documents, any
fixed-floating rate swap and the currency swaps.
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
- -- with respect to the US$ notes, the A$ Equivalent -- 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.
105
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, any fixed-floating rate swap and the
currency swaps.
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 US$ 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$50,000,000, as set forth in its most recent published annual report of
condition, and subject to supervision or examination by federal, state or
District of Columbia authority. The note trustee may also, if permitted by the
SEC, be organized under the laws of a jurisdiction other than the United States,
provided that it is authorized under such laws to exercise corporate trust
powers and is subject to examination by authority of such jurisdictions
substantially equivalent to the supervision or examination applicable to a
trustee in the United States.
The note trustee may resign after giving three months' written notice
to the issuer trustee, the trust manager, the security trustee and each rating
agency. The issuer trustee may also remove the note trustee in the following
circumstances:
106
o if the note trustee becomes insolvent;
o if the note trustee ceases its business;
o if the note trustee fails to comply with any of its obligations
under any transaction document and the issuer trustee determines
that this failure has had, or if continued, will have, a Material
Adverse Effect, and if capable of remedy, the note trustee does
not remedy this failure within 14 days after the earlier of the
following:
o the note trustee becoming aware of this failure; and
o receipt by the note trustee of written notice with respect
to this failure from either the issuer trustee or the trust
manager; or
o if the note trustee fails to satisfy any obligation imposed on it
under the United States Trust Indenture Act of 1939 with respect
to the trust or the note trust deed.
Holders of 75% of the aggregate outstanding principal amount of the US$
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 US$ 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 of 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 US$ notes and
that has not previously been reported.
LIST OF NOTEHOLDERS
Three or more holders of US$ notes, each of whom has owned a US$ note
for at least six months, may, upon written request to the note trustee, obtain
access to the current list of US$ noteholders of the issuer trustee for purposes
of communicating with other US$ noteholders
107
concerning their rights under the note trust deed or the US$ 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 US$ 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 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.
108
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.
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 US$ noteholder, with the note trustee;
109
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, any
fixed-floating rate swap or the currency swaps 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 either of the currency swaps
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;
o all or any part of any transaction document, other than a
fixed-floating rate swap or the currency swaps, 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, any fixed-floating
rate swap or the currency swaps.
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
110
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
Monies; and
o otherwise, the note trustee, acting on behalf of the US$
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.
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 Monies shall have one vote except
that the note trustee shall represent each US$ 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$10,000 or its equivalent,
but not part thereof, of the Secured Monies that he holds or in respect of which
he is a representative.
A resolution of all the Voting Mortgagees, including an Extraordinary
Resolution, may be passed, without any meeting or previous notice being
required, by an instrument or notes in writing which have been signed by all of
the Voting Mortgagees.
ENFORCEMENT OF THE CHARGE
At any time after an event of default occurs, a resolution passed at a
duly convened meeting by a majority consisting of not less than 75% of the votes
capable of being cast by Voting Mortgagees present in person or by proxy or a
written resolution signed by all of the Voting Mortgagees may direct the
security trustee to do any or all of the following:
o declare the charge to be enforceable;
o declare all Secured Monies immediately due and payable;
111
o convert the floating charge to a fixed charge over any or all of
the trust assets; or
o appoint a receiver over the trust assets or itself exercise the
powers that a receiver would otherwise have under the security
trust deed.
If the Noteholder Mortgagees are the only Voting Mortgagees, they may
direct the security trustee to do any act which the security trustee is required
to do, or may only do, at the direction of an Extraordinary Resolution of Voting
Mortgagees, including enforcing the charge.
THE NOTE TRUSTEE AS VOTING MORTGAGEE
If an event of default under the security trust deed occurs and is
continuing, the issuer trustee and the trust manager will promptly notify the
note trustee of such an occurrence and the note trustee shall deliver to each
US$ 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 US$ noteholders.
The rights, remedies and discretion of the US$ 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 US$ 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 US$ 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 US$ 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 US$ notes remain outstanding and are due and payable
otherwise than by reason of a default in payment of any amount due on the US$
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 US$ noteholders, and any other amounts
payable by the issuer trustee ranking in priority to or equal
with the US$ 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
112
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, 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 willful 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;
113
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 monies 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;
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 other than to the currency swap
provider for a liability owing under the Class B1 currency
swap;
o monetary liabilities of the issuer trustee to the Class A
noteholders; and
o monetary liabilities owing in relation to any redraws;
o seventh, to pay pro rata:
o any monetary liabilities of the issuer trustee to Class B
noteholders; and
o any monetary liabilities of the issuer trustee to the
currency swap provider under the Class B1 currency swap;
o eighth, to pay pro rata any amounts not covered in this section
owing to any Mortgagee under any transaction document, any
fixed-floating rate swap or a currency swap;
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
114
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, any fixed
floating rate swap or the currency swaps 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 documents, any fixed-floating rate swap or
the currency swaps 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;
115
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.
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
116
o breach other covenants, representations and warranties or other
provisions of the NBFI Agreement.
The NBFI Agreement also requires the issuer trustee to place monies
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 monies 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 monies out of that Trust Drawings
Account to the limit of moneys held in that account. National Australia Bank
Limited may withdraw those monies 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;
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
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;
117
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.
With respect to these express powers set forth above, the servicer
shall take into account whether its performance will have a Material Adverse
Effect.
UNDERTAKINGS BY THE SERVICER
The servicer has undertaken, among other things, the following:
o to collect all monies 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 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, any fixed-floating rate swap and
the currency swaps 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;
118
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, any fixed-floating
rate swaps and the currency swaps 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 0.220% per annum of the aggregate outstanding principal amount of the notes
- -- with respect to the US$ notes, the A$ Equivalent -- 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.
TERMINATION 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;
119
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;
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.
120
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 AGREEMENTS
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 the trust, it
must promptly notify the primary backup servicer of such removal or retirement
and offer the appointment as servicer of the trust to the primary backup
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 the
rating agencies have confirmed in writing to the issuer trustee that such
appointment will not have an adverse effect on the credit ratings of the notes.
Once the primary backup servicer has been appointed, it will be bound
by and must observe the rights, obligations and discretions conferred on the
servicer under the investment management agreement as if it were named in the
investment management agreement as the original servicer. Upon the appointment
of the primary backup servicer as servicer, Interstar Securities (Australia) Pty
Limited will immediately provide to the primary backup servicer all accounts,
books, documents, records or other property relating to the trust which are in
its possession or control. The issuer trustee will promptly arrange to provide
the primary backup servicer with 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 backup servicer with written notice and in
accordance with the provisions of the investment management agreement.
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
from time to time 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 servicer standby fee, then subject to the
primary backup servicer giving written notice to the issuer trustee, the issuer
trustee can deduct such amount from any amount payable to the servicer as a
servicer's fee. After its appointment as servicer, the primary backup servicer
will be entitled to receive the servicer's fee.
121
If the primary backup servicer is unable or declines the issuer
trustee's offer 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 is obliged to become servicer at the request of the issuer trustee. The
secondary backup servicer agreement will be governed by the laws of the State of
Victoria.
122
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;
123
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.
124
The arrears and security enforcement procedures may change over time as
a result of business changes, or legislative and regulatory changes.
125
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
MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30
PORTFOLIO AT: 1998 1998 1999 1999 2000 2000
- ----------------- ---------------- ---------------- ----------------- ------------------ ----------------- ------------------
Outstanding
Balance...... $1,096,782,349.81 $1,258,820,846.88 $1,500,609,532.07 $1,968,607,661.73 $2,609,611,105.11 $3,344,250,484.60
Number of Loans
Outstanding.. 8,112 9,440 11,328 14,498 18,579 23,091
Percentage of
Delinquent
Loans*
31 - 60 Days. 0.38% 0.40% 0.55% 0.54% 0.43% 0.35%
61 - 90 Days. 0.20% 0.23% 0.38% 0.31% 0.24% 0.16%
91 Days Plus. 0.12% 0.17% 0.18% 0.15% 0.13% 0.10%
------------------ ----------------- ----------------- ----------------- ------------------ ------------------
Total
Delinquencies
over 30
Days......... 0.70% 0.80% 1.11% 1.00% 0.80% 0.61%
================== ================= ================= ================= ================== ==================
MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30
PORTFOLIO AT: 2001 2001 2002 2002
- ----------------- ------------------- ------------------ ------------------ ------------------
Outstanding
Balance...... $4,020,835,770.89 $4,820,490,560.20 $5,864,319,193.21 $7,436,170,410.31
Number of Loans
Outstanding.. 27,406 32,114 38,133 46,825
Percentage of
Delinquent
Loans*
31 - 60 Days. 0.33% 0.28% 0.40% 0.58%
61 - 90 Days. 0.14% 0.12% 0.19% 0.18%
91 Days Plus. 0.06% 0.06% 0.10% 0.12%
------------------- ------------------ ------------------ ------------------
Total
Delinquencies
over 30
Days......... 0.53% 0.46% 0.70% 0.89%
=================== =================== ================== ==================
MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30
SIX MONTH PERIOD ENDING: 1998 1998 1999 1999 2000 2000
------------ ------------- ----------- ------------ ------------ ------------
Loan Losses as a % of Total
Outstanding Balance**......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
============== =============== ============= ============== ============== =============
MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30
SIX MONTH PERIOD ENDING: 2001 2001 2002 2002
----------- -------------- ---------- -------------
Loan Losses as a % of Total
Outstanding Balance**......... 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, the rates of delinquencies, foreclosures,
bankruptcies and losses with respect to the housing loan pool.
126
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 US$ 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.
127
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
U.S. 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 US$ notes, while redraws will tend to extend the weighted
average life of the US$ 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 table is 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 table is 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
table. Furthermore, since these discrepancies exist, principal payments on the
notes may be made earlier or later than the table indicates.
128
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 trustee and the following additional
assumptions:
o the initial cut-off date is the close of business on February 14,
2003;
o closing date for the notes is February 20, 2003;
o on the closing date the issuer trustee will purchase housing
loans with an aggregate principal balance of A$1,322,537,613;
o housing loans will be purchased by the issuer trustee during the
pre-funding period with an aggregate amount of A$44,095,555 and
will be purchased in full on March 20, 2003;
o the characteristics of the housing loans purchased during the
pre-funding period will have the same blended loan
characteristics as the housing loan pool described in
"Description of the Assets of the Trust", save for its total
size;
o payments on the US$ notes are made on each quarterly payment
date, regardless of the day on which payment actually occurs,
commencing in May 20, 2003, 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 will be issued;
o housing loans bearing a variable rate of interest maintain the
rate set as at December 13, 2002;
o borrowers in relation to 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 then current sum of the
outstanding Principal Amount of the Class B2 notes, the Class A2
A$ Equivalent of the outstanding Principal Amount of the Class A2
notes and the Class B1 A$ Equivalent of the outstanding Principal
Amount of the Class B1 notes;
129
o all prepayments are received on the fifteenth day of each month
and include the full month's interest on the prepayment;
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 Threshold Requirements are met;
o the trust manager does not direct the issuer trustee to exercise
its right of optional redemption of the notes, except, with
respect to the line titled "Weighted Average Life -- To Earlier
of Clean Up Call and Step-Up and Call (Years)", in respect of
which 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$0.5842=A$1.0000.
It is not likely that the housing loans will pay at any 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
assumed weighted average remaining term to maturity as 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 one
decimal place 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.
130
PERCENTAGE OF INITIAL PRINCIPAL AMOUNT OUTSTANDING OF THE CLASS A2 NOTES 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%
February 20, 2004.................. 99.2% 89.3% 84.4% 81.9% 79.4% 74.5% 69.5%
February 20, 2005.................. 98.4% 79.8% 71.2% 67.0% 63.0% 55.4% 48.3%
February 20, 2006.................. 97.6% 71.2% 60.0% 54.8% 50.0% 41.2% 33.5%
February 20, 2007.................. 96.7% 63.5% 50.5% 44.8% 39.6% 30.6% 23.2%
February 20, 2008.................. 95.6% 56.5% 42.5% 36.6% 31.4% 22.7% 16.1%
February 20, 2009.................. 93.8% 49.9% 35.4% 29.6% 24.6% 16.7% 11.1%
February 20, 2010.................. 91.9% 44.0% 29.5% 23.9% 19.3% 12.3% 7.6%
February 20, 2011.................. 89.9% 38.7% 24.5% 19.3% 15.1% 9.0% 5.2%
February 20, 2012.................. 87.7% 34.0% 20.3% 15.5% 11.8% 6.6% 3.5%
February 20, 2013.................. 85.3% 29.8% 16.8% 12.5% 9.2% 4.8% 2.4%
February 20, 2014.................. 82.9% 26.0% 13.9% 10.0% 7.1% 3.5% 1.6%
February 20, 2015.................. 80.2% 22.7% 11.4% 8.0% 5.5% 2.5% 1.1%
February 20, 2016.................. 77.4% 19.7% 9.4% 6.3% 4.3% 1.8% 0.8%
February 20, 2017.................. 74.3% 17.0% 7.6% 5.0% 3.3% 1.3% 0.5%
February 20, 2018.................. 71.1% 14.6% 6.2% 4.0% 2.5% 1.0% 0.3%
February 20, 2019.................. 67.7% 12.5% 5.0% 3.1% 1.9% 0.7% 0.2%
February 20, 2020.................. 64.0% 10.7% 4.0% 2.4% 1.4% 0.5% 0.1%
February 20, 2021.................. 60.1% 9.0% 3.2% 1.9% 1.1% 0.3% 0.1%
February 20, 2022.................. 55.9% 7.6% 2.5% 1.4% 0.8% 0.2% 0.1%
February 20, 2023.................. 51.4% 6.3% 2.0% 1.1% 0.6% 0.2% 0.0%
February 20, 2024.................. 46.7% 5.1% 1.5% 0.8% 0.4% 0.1% 0.0%
February 20, 2025.................. 41.6% 4.1% 1.2% 0.6% 0.3% 0.1% 0.0%
February 20, 2026.................. 36.2% 3.2% 0.9% 0.4% 0.2% 0.0% 0.0%
February 20, 2027.................. 30.5% 2.4% 0.6% 0.3% 0.1% 0.0% 0.0%
February 20, 2028.................. 24.3% 1.7% 0.4% 0.2% 0.1% 0.0% 0.0%
February 20, 2029.................. 17.9% 1.2% 0.3% 0.1% 0.1% 0.0% 0.0%
February 20, 2030.................. 11.3% 0.7% 0.1% 0.1% 0.0% 0.0% 0.0%
February 20, 2031.................. 4.7% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0%
February 20, 2032.................. 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)........... 6.79 4.89 4.16 3.85 3.56 3.06 2.62
To Maturity (Years)................ 18.97 7.83 5.66 4.93 4.34 3.46 2.85
- -----------
*Totals may not sum exactly due to rounding.
131
PERCENTAGE OF INITIAL PRINCIPAL AMOUNT OUTSTANDING OF THE CLASS B1 NOTES 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%
February 20, 2004................... 99.2% 89.3% 84.4% 81.9% 79.4% 74.5% 69.5%
February 20, 2005................... 98.4% 79.8% 71.2% 67.0% 63.0% 55.4% 48.3%
February 20, 2006................... 97.6% 71.2% 60.0% 54.8% 50.0% 41.2% 33.5%
February 20, 2007................... 96.7% 63.5% 50.5% 44.8% 39.6% 30.6% 23.2%
February 20, 2008................... 95.6% 56.5% 42.5% 36.6% 31.4% 22.7% 16.1%
February 20, 2009................... 93.8% 49.9% 35.4% 29.6% 24.6% 16.7% 11.1%
February 20, 2010................... 91.9% 44.0% 29.5% 23.9% 19.3% 12.3% 7.6%
February 20, 2011................... 89.9% 38.7% 24.5% 19.3% 15.1% 9.0% 5.2%
February 20, 2012................... 87.7% 34.0% 20.3% 15.5% 11.8% 6.6% 3.5%
February 20, 2013................... 85.3% 29.8% 16.8% 12.5% 9.2% 4.8% 2.4%
February 20, 2014................... 82.9% 26.0% 13.9% 10.0% 7.1% 3.5% 1.6%
February 20, 2015................... 80.2% 22.7% 11.4% 8.0% 5.5% 2.5% 1.1%
February 20, 2016................... 77.4% 19.7% 9.4% 6.3% 4.3% 1.8% 0.8%
February 20, 2017................... 74.3% 17.0% 7.6% 5.0% 3.3% 1.3% 0.5%
February 20, 2018................... 71.1% 14.6% 6.2% 4.0% 2.5% 1.0% 0.3%
February 20, 2019................... 67.7% 12.5% 5.0% 3.1% 1.9% 0.7% 0.2%
February 20, 2020................... 64.0% 10.7% 4.0% 2.4% 1.4% 0.5% 0.1%
February 20, 2021................... 60.1% 9.0% 3.2% 1.9% 1.1% 0.3% 0.1%
February 20, 2022................... 55.9% 7.6% 2.5% 1.4% 0.8% 0.2% 0.1%
February 20, 2023................... 51.4% 6.3% 2.0% 1.1% 0.6% 0.2% 0.0%
February 20, 2024................... 46.7% 5.1% 1.5% 0.8% 0.4% 0.1% 0.0%
February 20, 2025................... 41.6% 4.1% 1.2% 0.6% 0.3% 0.1% 0.0%
February 20, 2026................... 36.2% 3.2% 0.9% 0.4% 0.2% 0.0% 0.0%
February 20, 2027................... 30.5% 2.4% 0.6% 0.3% 0.1% 0.0% 0.0%
February 20, 2028................... 24.3% 1.7% 0.4% 0.2% 0.1% 0.0% 0.0%
February 20, 2029................... 17.9% 1.2% 0.3% 0.1% 0.1% 0.0% 0.0%
February 20, 2030................... 11.3% 0.7% 0.1% 0.1% 0.0% 0.0% 0.0%
February 20, 2031................... 4.7% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0%
February 20, 2032................... 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)............ 6.79 4.89 4.16 3.85 3.56 3.06 2.62
To Maturity (Years)................. 18.97 7.83 5.66 4.93 4.34 3.46 2.85
- -------------
*Totals may not sum exactly due to rounding.
132
USE OF PROCEEDS
The proceeds from the sale of the US$ notes, after being exchanged
pursuant to the currency swaps, will amount to A$[___________] and will be used
by the issuer trustee, in most part, to acquire from each seller that seller's
beneficial interest in the housing loans and related mortgages, to make a
deposit in the prefunding account and to acquire Liquid Authorized Investments.
See "Description of the Assets of the Trust -- Acquisition of Housing Loans
after the Closing Date" and "Description of the US$ Notes -- Application of
Mortgage Principal Repayments 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.
133
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
134
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 security 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 monies 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:
135
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
136
Australia, the liquidator of a company may avoid a loan under which an
extortionate interest rate is levied.
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
137
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.
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 US$ notes in full, some
or all of the US$ 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:
138
o vary the terms of a housing loan on the grounds of hardship or
that it is an unjust contract;
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.
139
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 US$ 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
(the CODE), 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 US$ 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 US$ 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 US$ 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 US$ notes as "capital assets" within the meaning of Section 1221 of the
Code.
140
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 US$
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 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 US$ 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 US$ notes will be characterized as debt for United States
federal income tax purposes. Each US$ noteholder, by acceptance of a US$ note,
agrees to treat the notes as indebtedness.
The discussion below assumes that all payments on the US$ notes are
denominated in U.S. dollars and that the notes are not indexed securities or
strip notes. Additionally, the discussion assumes that the interest formula for
the US$ notes meets the requirements for "qualified stated interest" under
Treasury regulations, called the "OID Regulations," relating to original issue
discount. Under the OID Regulations, a US$ note will be considered issued with
original issue discount if its "stated redemption price at maturity" exceeds its
"issue price" (i.e., the price at which a substantial portion of the US$ notes
is first sold (not including sales to the Underwriters)). In general, a US$
note's "stated redemption price at maturity" is the sum of all payments to be
made on the US$ note other than payments of "qualified stated interest."
Further, if the US$ notes have any original issue discount, it will be de
minimis if it is less than 1/4% of the principal amount of the offered notes
multiplied by the number of full years included in their term.
INTEREST INCOME ON THE US$ NOTES
Based on the above assumption, except as discussed below, Mayer, Brown,
Rowe & Maw is of the opinion that you will be required to report as ordinary
interest income, the stated interest and original issue discount, if any, on the
US$ notes you hold in accordance with your method of tax accounting. Under the
OID Regulations, if you hold a US$ note issued with a de minimis amount of
original issue discount, you must include this original issue discount in
income, on a pro rata basis, as principal payments are made on the note. If you
purchase a US$ note for more or less than its principal amount, you will
generally be subject, respectively, to the premium amortization or market
discount rules of the Code, discussed below.
SALE OF NOTES
Mayer, Brown, Rowe & Maw is of the opinion that if you sell a US$ 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 US$
141
note. Your adjusted tax basis in a note will equal your cost for the US$ note,
decreased by any amortized premium and any payments other than interest made on
the US$ 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 US$ 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$3,000 of other United States income.
MARKET DISCOUNT
In the opinion of Mayer, Brown, Rowe & Maw, you will be considered to
have acquired a US$ 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.
In the case of a sale or other disposition of a US$ 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 US$ 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 US$ 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
142
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 US$ 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.
PREMIUM
In the opinion of Mayer, Brown, Rowe & Maw, you will generally be
considered to have acquired a US$ 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 US$ 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 US$
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 US$ 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
143
accrued, if any, and the amount of tax withheld from payments on the US$ 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 US$ 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.
144
AUSTRALIAN TAX MATTERS
The following is a summary of the material Australian tax provisions
relevant to this transaction. We suggest that you consult your Australian tax
advisors in relation to their investment 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 is currently accepted by the
Australian Taxation Office (ATO) 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
28A(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, are issued in a manner which satisfies the public
offer test as prescribed under section 128F of the Tax Act.
It is the issuer trustee's intention to issue the notes and interests
in the global notes in a way that will satisfy the public offer test and
otherwise meet the requirements of section 128F of the Tax Act.
This withholding tax exemption will not apply where, at the time of
issue, the issuer trustee knew or had reasonable grounds to suspect that the
notes, or an interest in the notes, was being or would later be acquired, either
directly or indirectly, by an associate of the issuer trustee, within the
meaning of section 128F(9) of the Tax Act, other than in the capacity of a
dealer, manager or underwriter in relation to a placement of the notes. However,
the Australian government on September 19, 2002 tabled in parliament as Taxation
Laws Amendment Bill (No. 6) 2002, legislation effective from August 29, 2001, to
treat interest payments to the following associates as being eligible for the
exemption if the issue of the debenture otherwise satisfies the requirements of
section 128F:
o an Australian resident that does not acquire the debenture in
carrying on business at or through a permanent establishment in a
country outside Australia;
o an Australian resident that acquires the debenture in carrying on
business at or through a permanent establishment in a country
outside Australia if the interest is
145
received in the capacity of a clearing house, paying agent, custodian,
funds manager or responsible entity of a registered scheme;
o a non-resident that acquires the debenture in carrying on
business at or through a permanent establishment in Australia;
and
o a non-resident that acquires the debenture in carrying on
business outside Australia if the interest is received in the
capacity of a clearing house, paying agent, custodian or funds
manager.
If the requirements for exemption under section 128F of the Tax Act are
met with respect to the 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.
Subject to certain statutory exceptions, tax will be deducted, at the
highest marginal tax rate plus medicare levy, from payments to resident
noteholders who do not provide the trustee with a tax file number or Australian
Business Number pursuant to the "Pay-As-You-Go" provisions of the tax
legislation.
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 (GST) implications of the transfer of their notes.
PROFIT ON SALE BY NON-RESIDENT NOTEHOLDERS
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.
146
There are however specific withholding tax rules that may apply to
treat a portion of the sale price of notes as interest for withholding tax
purposes. They are as follows:
o under section 128AA of the Tax Act, where a security is sold and
the transfer price exceeds the issue price, the excess is deemed
to be interest which may be subject to interest withholding tax.
Under the existing rules, it is unclear whether the profit on
sale would trigger an interest withholding tax obligation, even
if the notes are issued in accordance with section 128F. The
Australian government on September 19, 2002 tabled in parliament
as Taxation Laws Amendment Bill (No. 6) 2002, legislation that
clarifies the relationship between section 128AA and 128F to
exempt from interest withholding tax deemed interest under
section 128AA where that interest would have been exempt under
section 128F. This amendment is expected to apply to transfers
that occur on or after August 29, 2001; or
o notes that are sold to an Australian resident in connection with
a "washing arrangement" as defined in the Tax Act, where the
issue of notes are not covered by the exception in section 128F.
GOODS AND SERVICES TAX
The goods and services tax regime was introduced in Australia from
July 1, 2000.
The GST is a transactions tax and accordingly may impact various
transactions in which the issuer trustee is involved. Broadly, the impact of the
GST 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 GST equal to 1/11th of the total consideration
received for the supply to the ATO. The issuer trustee can obtain full input tax
credits for GST 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 GST on the supply to the ATO. The issuer trustee
can obtain full input tax credits for GST 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
GST on the supply. The issuer trustee is generally not entitled to input tax
credits for GST 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 GST 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.
The acquisition of notes by a noteholder may, in certain circumstances,
be considered by the Australian commissioner of taxation to constitute the
making of a financial supply by the noteholder. This is based on a view
expressed by the Australian commissioner of taxation in
147
Ruling GSTR 2002/2. In any event, this will not give rise to a liability for GST
on the part of noteholders but may affect their entitlement to input tax credits
on acquisitions which relate to acquiring notes. Noteholders should seek their
own advice in relation to the GST treatment of the notes.
FIXED-FLOATING RATE SWAP AND 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
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 SWAPS AND 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:
148
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.
DEBT AND EQUITY
Based on Australia's current taxation law, the notes on issue
constitute debt. Accordingly, interest paid by the issuer trustee in respect of
the notes will be tax deductible to the issuer trustee. Interest derived by
Australian tax resident recipients of the notes or non-residents that hold such
notes through a permanent establishment in Australia should be included in the
assessable income of the recipient.
New rules dealing with the characterisation of debt and equity for
Australian taxation purposes have been enacted and have had effect from July 1,
2001.
Broadly, the new rules have been drafted to characterise certain
interests on an economic substance basis rather than according to their legal
form. Interests will generally be regarded as equity where the rights and
returns attaching to the interests are contingent on the economic performance of
the entity, the right or the amount of the return is at the discretion of the
entity, or where the interest is convertible to equity. Interests which impose
an effective non-contingent obligation of an issuer to return to the investor an
amount at least equal to the amount invested will be characterised as debt.
The notes on issue have the following attributes:
o the notes are not convertible to equity;
o interest payable in respect of the notes is based on a specific
formula; and
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 these measures, the notes issued by the issuer trustee
should constitute debt.
OTHER TAXES
No stamp, issue, registration or similar taxes are payable in Australia
in connection with the issue of the notes. Furthermore, a transfer of, or
agreement to transfer, notes executed outside Australia should not be subject to
Australian stamp duty.
149
TAXATION OF THE TRUST
The net income of the trust for a given year of income will be
determined after deducting from the assessable income of the trust any allowable
deductions incurred by the trust. The assessable income will primarily be the
interest income that is derived by the trust from the provision of mortgage
finance. Subject to certain exceptions, the allowable deductions of the trust
will primarily be the expenses which are incurred for the purpose of deriving
assessable income or necessarily incurred in carrying on a business for the
purpose of gaining or producing assessable income. Expenses which are capital in
nature will not be allowable as deductions.
Under the current taxation law, the net income of the trust is to be
included in the assessable income of the beneficiaries of the trust who are
presently entitled to the income. This will be so whether or not the income is
actually paid to the unitholder, where the unitholder is presently entitled to
the net income of the trust. Where the net income is paid to a unitholder, it
will be assessable to the unitholder in the year to which the distribution
relates notwithstanding that it may be paid in the following year of income.
In the case of the trust, the residual income unit is held by Interstar
Securities (Australia) Pty Ltd who will be presently entitled to the net income
of the trust. The trust itself will not currently be liable to income tax on the
net income derived by the trust.
TAX REFORM PROPOSALS
TAXATION OF TRUSTS AS COMPANIES
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 start
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 trust.
TAX CONSOLIDATION
The Australian federal government has released various bills and
legislation in relation to some aspects of a new tax consolidation regime to
apply from July 1, 2002.
150
The head company of a tax consolidated group will be liable for income
tax in respect of itself and all of its wholly-owned group members. The bills
and legislation provide that where, however, the head company fails to meet its
income tax liabilities, each wholly-owned group member is jointly and severally
liable to pay the consolidated group's income tax liabilities. Thus, there is
contingent risk that the members of a consolidated group may be liable to
contribute to a consolidated group's income tax liabilities.
It is not the current intention of the issuer trustee or the trust
manager that an election to consolidate the trust be made and thus there is no
intention that the trust form part of a tax consolidated group. On the basis
that this remains the case, then the contingent risk identified above will not
arise.
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 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.
151
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
ANTI-TERRORISM RESTRICTIONS
The written approval of the Australian Minister of Foreign Affairs is
required for transactions involving the control or ownership of assets by
persons or entities linked to terrorist activities and identified by the United
Nations and the Commonwealth of Australia under the Charter of the United
Nations (Anti-terrorism - Persons and Entities) List, as published from time to
time in the Commonwealth Government Gazette. This includes individuals or
entities linked with the Taliban, Osama bin Laden and other terrorist
organizations. Transactions involving persons published in the Commonwealth
Government Gazette without the permission of the Australian Minister for Foreign
Affairs are a criminal offence.
PROHIBITED TRANSACTIONS
Transactions involving the Government of Iraq or its agencies and UNITA
(the United Union for the Total Independence of Angola), its senior officials
and their immediate families, and individuals associated with the regime of
former President of Yugoslavia Slobodan Milosevic are prohibited under the
Banking (Foreign Exchange) Regulations 1959 (Cth). The Reserve Bank of Australia
publishes changes to prohibited parties and variations in the restrictions on
those parties from time to time in the Commonwealth Government Gazette.
TRANSACTIONS WHICH MAY BE APPROVED BY THE RESERVE BANK OF AUSTRALIA
Transactions over A$100,000 involving the Embassy of the Federal
Republic of Yugoslavia, the Consulate-General of the Federal Republic of
Yugoslavia and Narodna Banka Jugoslavije (including Banque Nationale de
Yugoslavie) require prior approval from the Reserve Bank of Australia.
ERISA CONSIDERATIONS
Subject to the considerations discussed in this section, the US$ notes
are eligible for purchase by employee benefit plans.
152
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
US$ 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.
(Although there is no specific guidance in the regulation regarding whether a
principal charge-off feature under the circumstances described above would
constitute a "substantial equity feature," the regulation does state that an
instrument will not fail to be treated as indebtedness merely because it has
certain equity features, such as additional variable interest or conversion
rights, that are incidental to the instrument's primary fixed obligation.) The
debt characterization of the notes could change after their initial issuance if
the trust incurs losses. This risk of recharacterization is enhanced for the
Class B1 notes because they are subordinated to the Class A2 notes.
However, without regard to whether the US$ 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 backup servicer,
the trust manager, the note trustee, a 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;
153
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 US$ 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 US$
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 US$ 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 US$ 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 US$ notes as legal investments for you.
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 US$ 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".
154
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 B1 notes and
the Class B2 notes will be conditioned on obtaining a rating of AA-(CreditWatch
Developing) 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 US$ 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
availability of income after payment of interest on the notes and the trust's
expenses, 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.
PLAN OF DISTRIBUTION
UNDERWRITING
Under the terms and subject to the conditions contained in the
underwriting agreement among the underwriters, the issuer trustee, the servicer
and the trust manager, the issuer trustee has agreed to sell to the
underwriters, and each underwriter has agreed to purchase from the issuer
trustee, the class and Principal Amount of the US$ notes set forth opposite each
underwriters' name in the tables below:
PRINCIPAL AMOUNT OF
CLASS A2 NOTES
UNDERWRITERS OF THE CLASS A2 NOTES (US$)
---------------------------------- --------------------
Barclays Capital Inc................................................................. $[___________]
[______________________________]..................................................... $[-----------]
[______________________________]..................................................... $[-----------]
Total................................................................................ $[___________]
PRINCIPAL AMOUNT OF
CLASS B1 NOTES
UNDERWRITERS OF THE CLASS B1 NOTES (US$)
---------------------------------- ---------------------
Barclays Capital Inc................................................................. $[___________]
155
The underwriting agreement provides that the underwriters are obligated
to purchase all of the US$ notes if any are purchased.
The underwriters propose to offer the Class A2 notes and the Class B1
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 of each class of US$ notes. 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............................................................. [___________] [___________]
Class B1 notes............................................................. [___________] [___________]
The trust manager estimates that the out-of-pocket expenses for this
offering will be approximately US$[ ].
The trust manager has agreed to indemnify the underwriters against
civil liabilities under the Securities Act, or contribute to payments which the
underwriters may be required to make in that respect.
The total underwriting discounts and commissions for the US$ notes will
be equal to U.S.$[ ]. The underwriting discounts and commissions will be paid
separately by Interstar Securities (Australia) Pty Limited and not from the
proceeds of the issuance of the US$ notes.
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;
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 US$
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 US$ notes originally
sold by a syndicate member are purchased in a syndicate covering
transaction to cover syndicate short positions.
156
Stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the US$ 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 US$ 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 US$
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 US$ 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.
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 US$ 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 US$ 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 US$ notes; and
157
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 US$ notes on acceptance of the offer
by each offeree or invitee is a minimum amount of A$500,000, or
its equivalent in another currency -- disregarding amounts, if
any, lent by the issuer trustee or other person offering the
notes or any associate of them -- or the offer or invitation is
otherwise an offer or invitation for which no disclosure is
required to be made under Part 6D.2 of the Corporations Act 2001
of Australia;
o the offer, invitation or distribution complies with all
applicable laws, regulations and directives in relation to the
offer, invitation or distribution and does not require any
document to be lodged with the Australian Securities and
Investments Commission; and
o the US$ 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 US$ notes, as identified on a list
provided by the trust manager.
In addition, each underwriter has agreed that, in connection with the
primary distribution of the US$ notes, it will not sell any US$ 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 US$ notes or any interest in such US$ 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 US$ notes for which
they subscribe for sale within 30 days of the issue of those US$ 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 the underwriter in
electronic form on Reuters or the electronic information system
made available to its subscribers by Bloomberg, L.P., specifying
in such offer the name of the issuer and the price at which the
US$ notes are offered for sale; or
o by the underwriter offering those US$ 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;
156
o as a result of being accepted for listing on a stock exchange where the
issuer trustee has previously entered into an agreement with the
underwriter in relation to the placement of the US$ notes requiring the
issuer trustee to seek such listing; or
o to at least 100 persons who it would be reasonable to regard as either
having acquired instruments similar to the US$ notes in the past or as
likely to be interested in acquiring US$ notes.
GENERAL INFORMATION
LISTING
Applications have been made to list the US$ notes on the Australian
Stock Exchange.
AUTHORIZATION
The issuer trustee has obtained all necessary consents, approvals and
authorizations in connection with the issue and performance of the US$ notes.
The issue of the US$ notes has been authorized by the resolutions of the board
of directors of Perpetual Trustees Victoria Limited passed on [___________].
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 US$ notes have been accepted for clearance through Euroclear and
Clearstream, Luxembourg with the Common Code number [__________________] and
ISIN [__________].
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 US$ notes will initially be issued in the form of registered,
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 US$
notes to the noteholders and will record the existence of those
rights; and
o as a result of the issue of the US$ 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 US$ 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, excluding
any Australian tax matters, with respect to the US$ notes for Interstar
Securitization Management Pty Limited. KPMG will pass upon the Australian tax
matters with respect to the US$ notes for Interstar Securitisation Management
Pty Limited. Orrick, Herrington & Sutcliffe, London, United Kingdom will act as
United States legal counsel to the underwriters.
160
GLOSSARY
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.
AGGREGATE PRINCIPAL LOSS
AMOUNT..................................means, in relation to a Collection
Period, the aggregate amount of
Principal Losses which are
attributable to principal in
relation to the housing loans for
that Collection Period.
APPROVED BANK...............................means a bank which has a short term
rating of 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:
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
Approved 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;
161
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 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 [___________].
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 for a Class B2
note, the linear interpolation of
the average of the buying and
selling rates for [cash] 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
162
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 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.
CARRYOVER CHARGE-OFF .......................see page [_____].
CHARGE-OFF..................................see page [_____].
CLASS A2 A$ EQUIVALENT......................means, in relation to an amount
denominated or to be denominated in
US$:
o prior to the termination of the
Class A2 currency swap, the
amount converted to and
denominated in A$ at the rate of
exchange set forth in the Class
A2 currency swap for the exchange
of United States dollars for
Australian dollars; and
o after the termination of the
Class A2 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.
CLASS A2 A$ INTEREST AMOUNT.................means, in relation to a monthly
payment date, the amount in A$
calculated as follows:
o on a daily basis at a rate equal
at the Bank Bill Rate on that day
plus a margin set forth in the
Class A2 currency swap that will
increase after the Step-Up Margin
Date;
o on the Class A2 A$ Equivalent of
the Class A2 Currency Swap
Notional Amount for that monthly
payment date; and
163
o on the basis of the actual number
of days in the relevant payment
period and a year of 365 days.
CLASS A2 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 Interest Period for
that quarterly payment date;
o in relation to a monthly payment
date which is 1 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 Interest
Period for that quarterly
payment date; minus
o the Class A2 US$ Equivalent of
the amounts distributed to the
currency swap provider or the
note trustee in respect of
principal on the Class A2
notes 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 Interest
Period for that quarterly
payment date; minus
o the Class A2 US$ Equivalent of
the amounts distributed to the
currency swap provider or the
note trustee in respect of
principal on the Class A2
notes on the two immediately
preceding monthly payment
dates.
CLASS A2 US$ EQUIVALENT.....................means, in relation to an amount
denominated or to be denominated in
A$:
o prior to the termination of the
Class A2 currency swap, the
amount converted to and
denominated in US$ at the rate of
exchange set forth in the Class
A2 currency swap for the exchange
of Australian dollars for United
States dollars; and
164
o after the termination of the
Class A2 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 be
converted into US$ to pay
principal or interest, as
applicable, on the Class A2
notes.
CLASS B1 A$ EQUIVALENT......................means, in relation to an amount
denominated or to be denominated in
US$:
o prior to the termination of the
Class B1 currency swap, the
amount converted to and
denominated in A$ at the rate of
exchange set forth in the Class
B1 currency swap for the exchange
of United States dollars for
Australian dollars; and
o after the termination of the
Class B1 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 B1
notes to be paid from or by
reference to such amount.
CLASS B1 A$ INTEREST AMOUNT.................means, in relation to a monthly
payment date, the amount in A$
calculated as follows:
o on a daily basis at a rate equal
at the Bank Bill Rate on that day
plus a margin set forth in the
Class B1 currency swap that will
increase after the Step-Up Margin
Date;
o on the Class B1 A$ Equivalent of
the Class B1 Currency Swap
Notional Amount for that monthly
payment date; and
o on the basis of the actual number
of days in the relevant payment
period and a year of 365 days.
CLASS B1 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 B1 notes as at the first
day of the Interest Period for
that quarterly payment date;
165
o in relation to a monthly payment
date which is 1 monthly payment
date immediately preceding a
quarterly payment date, an amount
equal to:
o the aggregate Principal Amount
of the Class B1 notes as at
the first day of the Interest
Period for that quarterly
payment date; minus
o the Class B1 US$ Equivalent of
the amounts distributed to the
currency swap provider or the
note trustee in respect of
principal on the Class B1
notes 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 B1 notes as at
the first day of the Interest
Period for that quarterly
payment date; minus
o the Class B1 US$ Equivalent of
the amounts distributed to the
currency swap provider or the
note trustee in respect of
principal on the Class B1
notes on the two immediately
preceding monthly payment
dates.
CLASS B1 US$ EQUIVALENT.....................means in relation to an amount
denominated or to be denominated in
A$:
o prior to the termination of the
Class B1 currency swap, the
amount converted to and
denominated in US$ at the rate of
exchange set forth in the Class
B1 currency swap for the exchange
of Australian dollars for United
States dollars; and
o after the termination of the
Class B1 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 be
converted into US$ to pay
principal or interest, as
applicable, on the Class B1
notes.
CODE........................................see page [___________].
COLLECTION PERIOD...........................see page [___________].
166
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.
DETERMINATION DATE..........................see page [___________].
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 [___________].
INCOME SHORTFALL............................see page [___________].
INITIAL PRINCIPAL AMOUNT....................means the principal amount of the
note on the date it is issued.
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 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
167
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 respect to the
relevant corporation.
INTEREST PERIOD.............................see page [___________].
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
168
on the issuer trustee under any
transaction document, any
fixed-floating rate swap, the
Class A2 currency swap or the
Class B1 currency swap 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 US$ notes, the rate
applicable for deposits in U.S.
dollars for a period of 3 months [-
or in the case of the first Interest
Period, the linear interpolation of
the rates applicable for deposits in
U.S. dollars for [2] 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 closing date (the ISDA
DEFINITIONS). USD-LIBOR-REFERENCE
BANKS means that the rate for an
Interest Period for US$ notes will
be determined on the basis of the
rates at which deposits in U.S.
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
169
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 U.S. 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 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 Bank, or the acquisition
of certificates of deposit or any
other debt security issued by a
bank which has a short term
rating of 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.
LIQUIDATION LOSSES......................... means, with respect to any housing
loan that becomes a liquidated loan
during a Collection Period, the
Unpaid Balance of that liquidated
loan, after the application of all
Liquidation Proceeds relating to
that liquidated loan, including any
enforcement expenses in respect of
that liquidated loan.
LIQUIDATION PROCEEDS....................... means, in relation to a housing
loan, the amount received by or on
behalf of the issuer trustee in
connection with the liquidation of
such housing loan including, without
limitation:
170
o proceeds arising from the
enforcement of the mortgage in
relation to that housing loan and
sale of the land subject to such
mortgage;
o proceeds arising from the
enforcement of any loan security
in relation to that housing loan;
o proceeds of any claim under the
relevant mortgage insurance
policy or title insurance policy;
and
o proceeds arising from any taking
or compulsory acquisition of the
land in relation to such housing
loan by any government agency.
LIQUIDITY PURPOSES..........................see page [___________].
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 [___________].
MORTGAGE PRINCIPAL
REPAYMENTS..............................see page [___________].
MORTGAGEES..................................see page [___________].
NOTEHOLDER MORTGAGEES.......................means the Class B2 noteholders, the
Class A1 noteholders and the note
trustee, on behalf of the Class A2
noteholders and the Class B1
noteholders.
PREFUNDING ACCOUNT..........................see page [___________].
PRESCRIBED MINIMUM LEVEL....................see page [___________].
PRIMARY EXPENSES............................see page [___________].
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 note on or before
that date.
171
PRINCIPAL
LOSSES......................................means, for any Collection Period,
the amount of those Liquidation
Losses which is attributable to
principal, calculated on the basis
that all Liquidation Proceeds
actually received by or on behalf of
the issuer trustee in relation to a
housing loan are applied first
against interest, fees and other
enforcement expenses relating to
that housing loan and then against
the principal relating to that
housing loan.
QUARTERLY PAYMENT DATE......................see page [___________].
RECOVERY AMOUNT.............................see page [___________].
SECURED MONIES..............................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 whatsoever
under or in connection with a
transaction document, any
fixed-floating rate swap, the Class
A2 currency swap or the Class B1
currency swap.
SERVICER TRANSFER EVENT.....................see page [___________].
STEP-UP MARGIN DATE.........................means the quarterly payment date
falling in February 2010.
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.
THRESHOLD REQUIREMENTS......................see page [ ].
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, any
fixed-floating rate swap, the
Class A2 currency swap or the
Class B1 currency swap, and that
172
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, any fixed-floating rate
swap, the Class A2 currency swap
or the Class B1 currency swap, 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, any fixed-floating rate
swap, the Class A2 currency swap
or the Class B1 currency swap, or
a document provided under or in
connection with a transaction
document, any fixed-floating rate
swap, the Class A2 currency swap
or the Class B1 currency swap 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.
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.
VOTING MORTGAGEES...........................see page [___________].
173
INTERSTAR MILLENNIUM SERIES 2003-1G TRUST
CLASS A2 MORTGAGE BACKED FLOATING RATE NOTES
CLASS B1 MORTGAGE BACKED FLOATING RATE NOTES
PROSPECTUS
UNDERWRITERS OF THE CLASS A2 NOTES
BARCLAYS CAPITAL
[----------------] [----------------]
UNDERWRITER OF THE CLASS B1 NOTES
BARCLAYS CAPITAL
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............................................ $ 71,300
Printing and Engraving.......................................... $ 85,000
Legal Fees and Expenses......................................... $ 500,000
Trustee Fees and Expenses....................................... $ 15,000
Rating Agency Fees.............................................. $ 200,000
Accounting Fees & Expenses...................................... $ 50,000
Miscellaneous................................................... $ 75,000
---------
Total........................................................... $996,300
=========
- ----------
* All amounts except the SEC Registration Fee are estimates of expenses
incurred in connection with the issuance and distribution of the Notes.
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. One fully paid share
of A$1.00 was allotted to Interstar Securities (Australia) Pty Limited.
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 2001 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 2001.
ITEM 36. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
1.1 Form of Underwriting Agreement.
3.1 Constitution.
4.1 Master Trust Deed.
II-1
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.
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.
II-3
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 the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Melbourne, Australia, on the 17th day of January,
2003.
Interstar Securitization
Management Pty Limited
By: /s/ Sam Kyriacou
---------------------------
Name: Sam Kyriacou
Title: Director and Chief Financial Officer
II-4
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/ Vernon Spencer Director January 7, 2003
- ----------------------------------
/s/ Sam Kyriacou Director January 14, 2003
- ----------------------------------
/s/ Sam Kyriacou Principal Executive Officer January 14, 2003
- ----------------------------------
/s/ Andrew Twyford Principal Financial Officer January 14, 2003
- ----------------------------------
/s/ Andrew Twyford Principal Accounting Officer January 14, 2003
- ----------------------------------
II-5
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
Address: CT Corporation
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.
II-7