AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 2003
REGISTRATION NO. 333-108537
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
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
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 $60,675.00
- ------------------------------------------------------------------------------------------------------------------------
Class B1 Mortgage Backed Floating Rate Notes.... $28,000,000 100% $28,000,000 $2,265.20
- ------------------------------------------------------------------------------------------------------------------------
Total Mortgage Backed Floating Rate Notes....... $778,000,000 -- $778,000,000 $62,940.20
========================================================================================================================
* Of which 161.80 has already been paid.
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 SEPTEMBER 29, 2003
INTERSTAR MILLENNIUM SERIES 2003-5G TRUST
US$750,000,000 CLASS A2 MORTGAGE BACKED FLOATING RATE NOTES
US$25,000,000 CLASS B1 MORTGAGE BACKED FLOATING RATE NOTES
[INTERSTAR LOGO]
INTERSTAR SECURITISATION MANAGEMENT PTY LIMITED
(ABN 56 100 346 898)
TRUST MANAGER
PERPETUAL TRUSTEES VICTORIA LIMITED
(ABN 47 004 027 258)
ISSUER TRUSTEE
The Class A2 notes and the Class B1 notes, collectively the US$ notes,
will be collateralized by a pool of housing loans secured by properties located
in Australia. The Interstar Millennium Series 2003-5G 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 2003-5G 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 16.
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 ____%
An application will be 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 [_______] , 2003.
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.
UNDERWRITERS OF THE CLASS A2 NOTES AND THE CLASS B1 NOTES
BARCLAYS CAPITAL JPMORGAN
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..........................................................v
Australian Disclaimers........................................................................................viii
Summary .........................................................................................................1
Parties to the Transaction..............................................................................1
Structural Diagram......................................................................................3
Summary of the Notes....................................................................................4
Structural Overview.....................................................................................5
Credit Enhancements.....................................................................................5
Liquidity Enhancement...................................................................................6
Redraws ................................................................................................7
Hedging Arrangements....................................................................................7
Optional Redemption.....................................................................................8
Prefunding..............................................................................................8
The Housing Loan Pool...................................................................................9
Selected Housing Loan Pool Data as of Close of Business on September 1, 2003............................9
Withholding Tax........................................................................................10
U.S. Tax Status........................................................................................10
Australian Tax Status..................................................................................10
Legal Investment.......................................................................................10
ERISA Considerations...................................................................................10
Book-Entry Registration................................................................................10
Collections............................................................................................11
Interest on the Notes..................................................................................11
Principal on The Notes.................................................................................12
Allocation of Cash Flows...............................................................................12
Distribution of Income On Each Payment Date.....................................................................13
Distribution of Mortgage Principal Repayments, Liquid Authorized Investments and
Recovery Amounts on Each Payment Date .................................................................15
Risk Factors....................................................................................................16
Capitalized Terms...............................................................................................30
U.S. Dollar Presentation........................................................................................30
The Issuer Trustee, the Trust Manager and the Servicer..........................................................31
The Issuer Trustee.....................................................................................31
Directors..............................................................................................31
The Trust Manager......................................................................................31
The Servicer...........................................................................................32
The Seller.............................................................................................34
The Backup Servicer....................................................................................35
Description of the Trust........................................................................................36
Interstar Millennium Trusts Securitization Program.....................................................36
Interstar Millennium Series 2003-5G Trust..............................................................36
Description of the Assets of the Trust..........................................................................37
Assets of the Trust....................................................................................37
The Housing Loans......................................................................................37
Acquisition of Housing Loans after the Closing Date....................................................38
Transfer and Assignment of the Housing Loans...........................................................38
Representations, Warranties and Eligibility Criteria...................................................38
i
TABLE OF CONTENTS
(continued)
PAGE
----
Breach of Representations and Warranties...............................................................43
Other Features of the Housing Loans....................................................................43
Details of the Housing Loan Pool.......................................................................44
Housing Loan Information........................................................................................45
Analysis Of The Housing Loan Pool...............................................................................45
Housing Loans By Occupancy......................................................................................45
Housing Loans By LVR (Loan-To-Value Ratio)......................................................................46
Housing Loans By Product Types..................................................................................46
Housing Loans By Geographical Distribution......................................................................47
Housing Loans By Loan Size......................................................................................47
Housing Loans By Postcode Concentration-- Top 10 By Loan Amount................................................48
Housing Loans By Loan Seasoning.................................................................................48
Housing Loans By Maturity.......................................................................................48
Housing Loans By Mortgage Insurer...............................................................................49
Housing Loans By Mortgage Insurer And LVR PMI Mortgage Insurance................................................49
Mortgage Loans By Mortgage Insurer And LVR PMI Indemnity........................................................50
Mortgage Loans By Mortgage Insurer And LVR GE Capital Mortgage Insurance........................................50
Housing Loans By Current Coupon Rates...........................................................................51
Housing Loans By Months Remaining To Maturity...................................................................51
Housing Loans By Interest Only Period Remaining.................................................................52
Housing Loans By Loan Type......................................................................................52
Interstar Residential Loan Program..............................................................................53
Origination Process....................................................................................53
Approval and Underwriting Process......................................................................53
General Features Of The Housing Loans..................................................................56
Special Features of the Housing Loans..................................................................57
The Mortgage Insurance Policies.................................................................................58
General ...............................................................................................58
Certain Provisions of Mortgage Insurance Policies......................................................58
Description of the Mortgage Insurers...................................................................60
The Title Insurance Policies....................................................................................62
Cover ..............................................................................................62
Period of Cover........................................................................................62
Refusal or Reduction in Claim..........................................................................63
Exclusions.............................................................................................63
Description of Title Insurer...........................................................................64
Description Of The US$ Notes....................................................................................64
General ...............................................................................................64
Form of the US$ Notes..................................................................................64
Distributions on the Notes.............................................................................68
Key Dates and Periods..................................................................................69
Example Calendar.......................................................................................70
Calculation of Income..................................................................................70
Income ................................................................................................70
Application of Mortgage Principal Repayments and Liquid Authorized Investments to Available Income.....70
Distribution of Available Income.......................................................................71
-ii-
TABLE OF CONTENTS
(continued)
PAGE
----
Additional Income Payments.............................................................................73
Interest on the Notes..................................................................................73
Mortgage Principal Repayments..........................................................................74
Principal Distributions................................................................................75
Charge-Offs............................................................................................78
Payments Into US$ Account..............................................................................78
Payments Out of US$ Account............................................................................78
Notices ...............................................................................................78
Fixed-Floating Rate Swaps..............................................................................79
The Currency Swaps.....................................................................................80
Redemption of the Notes for Taxation or Other Reasons..................................................85
Redemption of the Notes upon an Event of Default.......................................................86
Optional Redemption of the Notes.......................................................................86
Final Maturity Date....................................................................................88
Final Redemption of the Notes..........................................................................88
Termination of the Trust...............................................................................89
Prescription...........................................................................................89
Reports to Noteholders.................................................................................89
Voting and Consent of Noteholders......................................................................90
Description Of The Transaction Documents........................................................................91
Trust Accounts.........................................................................................91
Modifications..........................................................................................91
The Issuer Trustee.....................................................................................92
The Trust Manager......................................................................................95
The Note Trustee.......................................................................................96
Note Trustee's Annual Report...........................................................................97
List of Noteholders....................................................................................98
Reports ...............................................................................................98
The Security Trust Deed................................................................................98
The Check Account and Direct Paperless Entry Facilities Agreement.....................................105
The Investment Management Agreement...................................................................106
The Backup Servicer Agreement.........................................................................110
The Servicer...................................................................................................112
Servicing of Housing Loans............................................................................112
Collection and Enforcement Procedures.................................................................112
Collection and Foreclosure Process....................................................................113
Servicer Delinquency Experience.......................................................................114
Prepayment And Yield Considerations............................................................................115
General ..............................................................................................115
Prepayments...........................................................................................115
Weighted Average Lives................................................................................116
Use Of Proceeds................................................................................................121
Legal Aspects Of The Housing Loans.............................................................................121
General ..............................................................................................121
Nature of Housing Loans as Security...................................................................121
Strata Title..........................................................................................122
Urban Leasehold.......................................................................................122
-iii-
TABLE OF CONTENTS
(continued)
PAGE
----
Taking Security Over Land.............................................................................123
Enforcement of Registered Mortgages...................................................................123
Penalties and Prohibited Fees.........................................................................124
Bankruptcy............................................................................................124
Environmental.........................................................................................125
Insolvency Considerations.............................................................................126
Tax Treatment of Interest on Australian Housing Loans.................................................126
Consumer Credit Legislation...........................................................................126
United States Federal Income Tax Matters.......................................................................128
Overview .............................................................................................128
Interest Income on the US$ Notes......................................................................128
Sale of Notes.........................................................................................128
Market Discount.......................................................................................130
Premium ..............................................................................................131
Backup Withholding....................................................................................131
Australian Tax Matters.........................................................................................132
Payments of Principal, Premiums and Interest..........................................................132
Taxation of Financial Arrangements....................................................................133
Note Transfers........................................................................................133
Profit on Sale by Non-Resident Noteholders............................................................134
Goods and Services Tax................................................................................134
Fixed-Floating Rate Swaps and GST.....................................................................135
Currency Swaps and GST................................................................................136
Debt and Equity.......................................................................................136
Other Taxes...........................................................................................137
Taxation of the Trust.................................................................................137
Tax Reform Proposals..................................................................................137
Enforcement Of Foreign Judgments In Australia..................................................................139
Exchange Controls And Limitations..............................................................................140
Anti-terrorism Restrictions...........................................................................140
Prohibited Transactions...............................................................................140
Transactions which may be approved by the Reserve Bank of Australia...................................140
Erisa Considerations...........................................................................................140
Legal Investment Considerations................................................................................142
Available Information..........................................................................................142
Ratings Of The Notes...........................................................................................142
Plan Of Distribution...........................................................................................143
Underwriting..........................................................................................143
Offering Restrictions.................................................................................144
General Information............................................................................................147
Listing .............................................................................................147
Authorization.........................................................................................147
Litigation............................................................................................147
Euroclear and Clearstream, Luxembourg.................................................................147
Announcement...................................................................................................147
Legal Matters..................................................................................................147
Glossary ......................................................................................................149
-iv-
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 2003-5G 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 - Offering Restrictions".
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, calculation agent and
note registrar, the underwriters, National Australia Bank Limited, as
fixed-floating rate swap provider, the currency swap provider, or PMI Mortgage
Insurance Ltd, GE Capital Mortgage Insurance Corporation (Australia) Pty Ltd or
PMI Indemnity Limited 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, calculation agent and note
registrar, National Australia Bank Limited, as fixed-floating rate swap
provider, the currency swap provider, PMI Mortgage Insurance Ltd, GE Capital
Mortgage Insurance Corporation (Australia) Pty Ltd or PMI Indemnity Limited as
mortgage insurers and the underwriters do not recommend that any person should
purchase any of the US$ notes and do
v
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; acknowledges
that the trust manager does not hold an Australian financial services license;
acknowledges that he or she should make his or her own independent investigation
of the trust and the US$ notes; and acknowledges that he or she should seek his
or her 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.
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, OR TO ANY OTHER
PERSON TO WHOM THIS DOCUMENT MAY OTHERWISE LAWFULLY BE COMMUNICATED OR CAUSED TO
BE COMMUNICATED 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
vi
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.
vii
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, calculation agent and note registrar,
National Australia Bank Limited, as fixed-floating rate swap
provider, the currency swap provider 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 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, calculation agent and note registrar, National Australia
Bank Limited, as fixed-floating rate swap provider, the 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.
viii
[This page intentionally left blank.]
ix
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 2003-5G 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 (ABN 56 100 346 898), 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)
BACKUP SERVICER...................... KPMG Corporate Finance (Aust) Pty Limited
(ABN 43 007 363 215)
SELLER............................... 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
NOTE REGISTRAR....................... The Bank of New York, New York branch
RESIDUAL INCOME BENEFICIARY.......... Interstar Securities (Australia) Pty
Limited
JOINT-LEAD MANAGERS.................. Barclays Capital Inc. and J.P. Morgan
Securities Inc.
UNDERWRITERS......................... Barclays Capital Inc. and J.P. Morgan
Securities Inc.
1
MORTGAGE INSURERS.................... PMI Indemnity Limited (ABN 49 000 781
171), PMI Mortgage Insurance Ltd (ABN 70
000 511 071) and GE Capital Mortgage
Insurance Corporation (Australia) Pty Ltd
(ABN 52 081 488 440)
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............... Westpac Banking Corporation (ABN 33 007
457 141)
RATING AGENCIES...................... Moody's and S&P
2
STRUCTURAL DIAGRAM
BORROWERS
SELLERS
Interstar Securities (Australia) Pty A$ Housing
Limited Loan Payments SECURITY TRUSTEE
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
ISSUER TRUSTEE Payments from Mortgage
Perpetual Trustee Insurance Policies
SERVICER Victoria Limited
Interstar TITLE INSURER
Securities Interstar Millenium First American Title
(Australia) Pty Series 2003- 5G Trust Insurance Company
Limited of Australia Pty Limited
BACKUP Payments from
SERVICER Payments on the the Title
KPMG Corporate US$ notes Insurance Policies
Finance (Aust)
Pty Limited RESIDUAL
BENEFICIARY
CURRENCY SWAP PROVIDER Interstar Securities
Westpac Banking Corporation (Australia) Pty Limited
Payments on the Class B2
FIXED-FLOATING notes
RATE SWAP PROVIDER
National Australia PRINCIPAL PAYING AGENT
Bank Limited The Bank of New York CLASS B2 NOTEHOLDERS
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 A1 notes, if and when issued, and the Class B2 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 US$ 750,000,000 US$ 25,000,000 A$[39,000,000]
Principal Amount:
-----------------------------------------------------------------------------------------------------------------
% of Total: 93.6% 3.1% 3.3%
-----------------------------------------------------------------------------------------------------------------
Anticipated Ratings:
Moody's Aaa Aa3 Aa3
S&P AAA AA- AA-
-----------------------------------------------------------------------------------------------------------------
Interest rate from three-month LIBOR + [ * ]% three-month LIBOR + [ * ]% three-month Australian Bank
the closing date up Bill Rate + [ * ]%
to but excluding the
step-up margin date
-----------------------------------------------------------------------------------------------------------------
Interest rate from three-month LIBOR + [ * ]% three-month LIBOR + [ * ]% three-month Australian Bank
and including the Bill Rate + [ * ]%
step-up margin date
-----------------------------------------------------------------------------------------------------------------
Minimum Denominations: US$100,000 and minimum US$100,000 and minimum A$10,000 (with initial
increments of US$1,000 increments of US$1,000 in minimum subscription of
in excess excess A$500,000)
-----------------------------------------------------------------------------------------------------------------
Interest Accrual actual/360 actual/360 actual/365
Method:
-----------------------------------------------------------------------------------------------------------------
Payment Dates: The 20th day or, if the The 20th day or, if the 20th The 20th day or, if the 20th
20th day is not a day is not a business day, day is not a business day,
business day, then the then the next business day then the next business day of
next business day of of each January, April, July each January, April, July and
each January, April, and October. The first October. The first payment
July and October. The payment date will be in date will be in January 2004.
first payment date will January 2004.
be in January 2004.
-----------------------------------------------------------------------------------------------------------------
Clearance/Settlement: DTC/Euroclear/Clearstream, DTC/Euroclear/Clearstream, Offered in Australia only
Luxembourg Luxembourg
-----------------------------------------------------------------------------------------------------------------
Initial Cut-Off Date: Close of business [ * ] 2003
-----------------------------------------------------------------------------------------------------------------
Pricing Date: On or about [ * ] 2003
-----------------------------------------------------------------------------------------------------------------
Closing Date: [ * ] 2003
-----------------------------------------------------------------------------------------------------------------
Step-Up Margin Date: The payment date falling in October 2008
-----------------------------------------------------------------------------------------------------------------
Final Maturity Date: The payment date falling in January 2036
-----------------------------------------------------------------------------------------------------------------
Pre-Funding Period: For the period from the closing date to, but excluding, the first payment date, the
issuer trustee may acquire additional housing loans by applying the
money on deposit in the prefunding account.
-----------------------------------------------------------------------------------------------------------------
4
STRUCTURAL OVERVIEW
The Interstar Millennium Trusts securitization 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 securitizations under
the program. A series notice among the issuer trustee, Interstar Securities
(Australia) Pty Limited, as seller and servicer, Interstar Securitisation
Management Pty Limited, as trust manager, 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 2003-5G Trust
and the notes, which may vary from the terms set forth in the master trust deed.
Each securitization under the program is a separate transaction with a separate
trust. The assets of the Interstar Millennium Series 2003-5G 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 2003-5G Trust.
See "Description of the Trust".
The Interstar Millennium Series 2003-5G Trust involves the
securitization 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. Interstar Securities (Australia) Pty Limited, as
beneficiary 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.
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
5
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 notes 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
CREDIT SUPPORT
CLASS SUPPORT PERCENTAGE
----- ------- ----------
A2 Class B notes 6.40%
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 principal 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
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 and PMI
Mortgage Insurance Ltd will provide full coverage for the principal balance, and
interest, outstanding on each housing loan irrespective of its LVR. The mortgage
insurance policies are subject to some exclusions from coverage and rights of
termination which are described in "The Mortgage Insurance Policies".
TITLE INSURANCE POLICIES
Some housing loans may be covered by title insurance policies issued by
First American Title Insurance Company of Australia Pty Limited. Title insurance
will provide 100% coverage for losses arising as a result of a relevant mortgage
being subject to a prior encumbrance, not being validly registered or being
invalid or unenforceable. The title insurance policies are subject to some
exclusions from coverage and rights of termination which are described in "The
Title Insurance Policies".
LIQUIDITY ENHANCEMENT
To enable the issuer trustee to make timely payments of interest on the
notes and other trust expenses payable from interest collections on the housing
loans, the trust manager is required to ensure that the trust has an amount
equal to at least one percent of the Australian dollar equivalent of the
outstanding principal amount of the notes invested in highly-rated, short-term
investments. These liquid authorized investments are available to make interest
6
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 senior 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
payment dates from excess income, 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 from principal collections on the housing
loans for any redraws it advances to borrowers. 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 payment date, principal
collections on the housing loans for the collection period before that payment
date are insufficient to fund redraws for that collection period, then the trust
manager may give the issuer trustee a direction to, and the issuer trustee must,
issue a series of Class A1 notes. The trust manager must not give this direction
unless it has received written confirmation from each rating agency that the
issue of the Class A1 notes would not result in a downgrade or withdrawal of a
rating of any note then outstanding. See "Interstar Residential Loan Program --
Special Features of the Housing Loans".
HEDGING ARRANGEMENTS
To hedge its interest rate and currency exposures, the issuer trustee
will enter into the following hedging arrangements:
o fixed-floating rate swaps 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 swaps. On the closing
date, none of the housing loans will be fixed rate loans and no
fixed-floating rate swaps 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; and
o two US$ currency swaps, one in respect of the Class A2 notes
7
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 swaps, 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 swaps 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 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 payment date the
currency swap provider would be required to deduct 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$193,750,000 or 25% of the Australian dollar equivalent
of the initial outstanding principal amount of the US$ notes as of the closing
date. See "Description of the Assets of the Trust -- Acquisition of Housing
Loans after the Closing Date".
8
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 SEPTEMBER 1, 2003
Housing Loan Pool Size......................................... A$1,251,126,743
Total Number of Housing Loans.................................. 5,546
Average Housing Loan Balance................................... A$225,590.83
Maximum Housing Loan Balance................................... A$1,249,929.16
Minimum Housing Loan Balance................................... A$0
Total Valuation of the Properties.............................. A$1,800,194,286
Maximum Remaining Term to Maturity in months................... 349
Weighted Average Remaining Term to Maturity in months.......... 344.72
Weighted Average Seasoning in months........................... 2.29
Weighted Average Original Loan-to-Value Ratio.................. 69.08%
Weighted Average Current Loan-to-Value Ratio................... 74.11%
Maximum Current Loan-to-Value Ratio............................ 90.00%
The original loan-to-value ratio of a housing loan is calculated by
comparing the initial principal amount of the housing loan to the most recent
valuation of the property that is currently securing the housing loan. Thus, if
collateral has been released from the mortgage securing a housing loan or if the
property securing the housing loan has been revalued, the original loan-to-value
ratio may not reflect the actual loan-to-value ratio at the origination of that
housing loan.
Before the issuance of the notes, housing loans may be added to or
removed from the housing loan pool. New housing loans may also be substituted
for housing loans that are removed from the housing loan pool. This addition,
removal or substitution of housing loans may result in changes in the housing
loan pool characteristics shown in the preceding table and could affect the
weighted average lives and yields of the notes. The seller will not add, remove
or substitute any housing loans prior to the closing date if this would result
in a change of more than 5% in any of the characteristics of the pool of housing
loans described in the above table, unless a revised prospectus is delivered to
prospective investors.
9
WITHHOLDING TAX
Payments of principal and interest on the US$ 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 Notes -- Redemption of the
Notes for Taxation or Other Reasons".
U.S. TAX STATUS
In the opinion of Mayer, Brown, Rowe & Maw LLP, 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 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
10
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 any 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 senior 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 senior fees and expenses of the issuer trustee
will be replenished on future payment dates from excess income, to the extent
available. If there is excess income after payment of senior 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 notes will be payable quarterly in arrears on each
payment date. Amounts available 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 or
related swap amounts. 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 or related swap
amounts. Interest on each class of notes is calculated for each interest period
at the note's interest rate:
11
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 A1 notes and the Class B2 notes.
PRINCIPAL ON THE NOTES
Principal on the notes will be payable on each 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 pro rata 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 then be paid first on the Class A2
notes until such time as all the Class A2 notes have been redeemed in full and
second 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 the Class A1 notes and the Class A2 notes prior to
any distributions to the Class B notes.
ALLOCATION OF CASH FLOWS
On each payment date, the issuer trustee will repay principal and
interest to each noteholder to the extent that there are collections received
for those payments. The charts on the next two pages summarize the flow of
payments.
12
DISTRIBUTION OF INCOME ON EACH PAYMENT DATE
- --------------------------------------------------------------------------------
Pay to the seller the Accrued Interest Adjustment
- --------------------------------------------------------------------------------
|
|
---------------------------------------------------------
Pay any taxes
---------------------------------------------------------
|
|
---------------------------------------------------------
Pay pro rata:
o the issuer trustee's fee
o any fees payable to the note trustee
---------------------------------------------------------
|
|
---------------------------------------------------------
Pay pro rata:
o the fees payable pro rata to the paying agents
o any fees payable to the calculation agent
o any fees payable to the note registrar
---------------------------------------------------------
|
|
- --------------------------------------------------------------------------------
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 note
registrar, 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 note
registrar, the servicer and the trust manager - which the trust manager or the
issuer trustee reasonably anticipates will be incurred prior to the next 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 note
registrar, the servicer and the trust manager - not covered above which have
already been incurred prior to that payment date but which have not by the two
boxes 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 swaps 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 payment date to the Class
A1 noteholders
o (1) the Class A2 A$ Interest Amount for that payment date to the currency
swap provider and the reciprocal payment by the currency swap provider is
thereafter to be applied towards payment of interest on the Class A2 notes 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 payment date in order
to enable the issuer trustee to meet its obligations to pay interest on the
Class A2 notes 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 that 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 payment date to the currency
swap provider and the reciprocal payment by the currency swap provider is
thereafter to be applied towards payment of interest on the Class B1 notes
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 payment date in
order to enable the issuer trustee to meet its obligations to pay interest
on the Class B1 notes 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 that payment date
o any interest for the interest period ending on that 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 Class B1 currency
swap where the currency swap provider is the defaulting party
- --------------------------------------------------------------------------------
|
|
13
DISTRIBUTION OF INCOME ON
EACH PAYMENT DATE (CONTINUED)
- --------------------------------------------------------------------------------
Apply as Mortgage Principal Repayments amount 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 a
currency swaps where the currency swap provider is the
defaulting party
-------------------------------------------------------------------------------
|
|
- --------------------------------------------------------------------------------
Pay fees payable to the seller
- --------------------------------------------------------------------------------
|
|
- --------------------------------------------------------------------------------
Pay pro rata the balance to each holder of a residual income unit
- --------------------------------------------------------------------------------
14
DISTRIBUTION OF MORTGAGE PRINCIPAL REPAYMENTS,
LIQUID AUTHORIZED INVESTMENTS AND RECOVERY
AMOUNTS ON EACH PAYMENT DATE
- --------------------------------------------------------------------------------
Apply for liquidity purposes in replenishing liquid authorized
investments up to the prescribed minimum level, in funding
redraws or funding advances to borrowers under the housing
loans which are line of credit loans
- --------------------------------------------------------------------------------
|
|
- --------------------------------------------------------------------------------
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 (1) prior to the termination of the Class A2 currency swap, the
currency swap provider the Class A2 A$ Equivalent of the Principal Amount of
the Class A2 notes and the reciprocal payment to the currency swap provider
is thereafter to be applied to repaying principal on the Class A2 notes on
that 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 to repaying principal on the Class A2 notes on that payment
date
o Pay to (1) prior to the termination of the Class B1 currency swap, the
currency swap provider the Class B1 A$ Equivalent of the Principal Amount of
the Class B1 notes and the reciprocal payment to the currency swap provider
is thereafter to be applied to repaying principal on the Class B1 notes on
that 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 that 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 first, pay to (1) prior to the termination of the Class A2 currency swap, the
currency swap provider the Class A2 A$ Equivalent of the Principal Amount of
the Class A2 notes and the reciprocal payment by the currency swap provider
is thereafter to be applied to repaying principal on the Class A2 notes on
that payment date or (2) if the Class A2 currency swap has been terminated,
the note trustee for purchase of U.S. dollars at the spot exchange rate to be
applied in repaying principal on the Class A2 notes on that payment date, in
each case until such time as all Class A2 notes have been redeemed in full
o second, pro rata:
o Pay to (1) prior to the termination of the Class B1 currency swap, the
currency swap provider the Class B1 A$ Equivalent of the Principal
Amount of the Class B1 notes and reciprocal payment to the currency
swap provider is thereafter to be applied to repaying principal on the
Class B1 notes or (2) if the Class B1 currency swap has been
terminated, the note trustee for conversion into U.S. dollars at the
exchange rate to be applied in repaying principal on the Class B1 notes
that 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 capital unit as to A$10,
and the remaining balance pro rata to each holder of a residual income unit.
- -------------------------------------------------------------------------------
15
RISK FACTORS
The US$ 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 FROM o The notes are debt obligations of the
THE ASSETS OF THE TRUST issuer 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
willful 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 THE o The rate of principal and interest
ACTUAL RATE AND TIMING OF payments on pools of housing loans
PAYMENTS ON THE HOUSING LOANS varies among pools, 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
16
you expect; or
o if you bought your notes for less
than their face amount, the yield
on your notes will drop if
principal payments occur at a
slower rate than you expect.
LOSSES AND DELINQUENT PAYMENTS o If borrowers fail to make payments of
ON THE HOUSING LOANS MAY AFFECT interest and principal under the
THE RETURN ON YOUR NOTES housing loans when due and the credit
enhancements 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 ON THE HOUSING LOANS o Substantial delays could be
MAY CAUSE DELAYS IN PAYMENT AND encountered in connection with the
LOSSES liquidation of a housing 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 a mortgage insurance policy, a
title insurance policy or excess
income, will reduce the net amounts
recoverable by the issuer trustee
from an enforced housing loan or
mortgage. If the proceeds of the sale
of a mortgaged property, net of these
expenses, are less than the amount
due under the related housing loan,
the issuer trustee may not have
enough funds to make full payments of
interest and principal due to you,
unless the difference is covered
under a mortgage insurance policy or
a title insurance policy or by excess
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
MORTGAGE INSURANCE POLICIES MAY is governed by the terms of the
AFFECT THE RETURN ON YOUR NOTES relevant mortgage insurance policy,
which contains certain exclusions
that may allow that
17
mortgage insurer to reduce a claim or
terminate mortgage insurance cover in
respect of a housing loan in certain
circumstances. See "The Mortgage
Insurance Policies". Any such
reduction or termination may affect
the ability of the issuer trustee to
pay you principal and interest in
full.
CERTAIN PROVISIONS OF o The liability of the title insurer is
THE TITLE INSURANCE POLICIES MAY governed by the terms of the title
AFFECT THE RETURN ON YOUR NOTES insurance policy, which contains
certain exclusions 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
CLASS B NOTES PROVIDES ONLY provided through the subordination of
LIMITED PROTECTION AGAINST LOSSES the Class B notes to the Class A2
ON THE CLASS A2 NOTES notes is limited and 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
YOUR NOTES assist 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.
THE TERMINATION OF ANY OF THE o The issuer trustee will exchange the
SWAPS MAY SUBJECT YOU TO interest payments from any fixed rate
LOSSES FROM INTEREST RATE OR housing loans for variable rate
CURRENCY FLUCTUATIONS payments based upon the three-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 Notes --
Fixed-Floating Rate Swaps" 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-
18
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. 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 will 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.
19
PREPAYMENTS DURING A o If a prepayment is received on a
COLLECTION PERIOD MAY RESULT housing loan during a collection
IN YOU NOT RECEIVING YOUR FULL period, interest on the housing loan
INTEREST PAYMENTS will cease to accrue on that 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 payment date.
THE PROCEEDS FROM THE ENFORCEMENT o If the security trustee enforces the
OF THE SECURITY TRUST DEED MAY BE security interest over the assets of
INSUFFICIENT TO PAY AMOUNTS the trust after an event of default
DUE TO YOU under the security trust deed, there
is no assurance that the market value
of the assets of the trust will be
equal to or greater than the
outstanding principal and interest
due on the notes, or that the
security trustee will be able to
realize the full value of the assets
of the trust. The issuer trustee, the
security trustee, the note trustee,
the swap providers and other service
providers will generally be entitled
to receive the proceeds of any sale
of the assets of the trust, to the
extent they are owed fees and
expenses, before you. Consequently,
the proceeds from the sale of the
assets of the trust after an event of
default under the security trust deed
may be insufficient to pay you
principal and interest in full.
IF THE TRUST MANAGER DIRECTS THE o If the trust manager directs the
ISSUER TRUSTEE TO REDEEM THE NOTES issuer trustee to redeem the notes
EARLY, THE YIELD ON YOUR NOTES MAY early as described in "Description of
BE LOWER THAN EXPECTED the Notes --Optional Redemption of
the Notes", the 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 WITHHOLDING o If a withholding tax is imposed on
TAX WILL REDUCE PAYMENTS TO YOU payments by the issuer trustee or any
AND MAY LEAD TO AN EARLY paying agent of interest on your
REDEMPTION OF THE NOTES notes, you will not be entitled to
receive grossed-up amounts to
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 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
20
exercised, you may not be able to
reinvest the redemption payments at a
comparable interest rate.
THE FEATURES OF THE HOUSING LOANS o The features of the housing loans,
MAY CHANGE, WHICH COULD including their interest rates, may
AFFECT THE TIMING AND AMOUNT be changed by the servicer, either on
OF PAYMENTS TO YOU its own initiative or at a borrowers'
request. Some of these changes may
include the addition of newly
developed features which are not
described in this prospectus. As a
result of these changes and
borrowers' payments of principal, the
concentration of housing loans with
specific characteristics is likely to
change over time, which may affect
the timing and amount of payments you
receive.
o If the servicer changes the features
of the housing loans, borrowers may
elect to refinance their loan with
another lender to obtain more
favorable features. The refinancing
of housing loans could cause you to
experience higher rates of principal
prepayment than you expected, which
could affect the yield on your notes.
THERE ARE LIMITS ON THE AMOUNT OF o If the interest collections during a
AVAILABLE LIQUIDITY TO ENSURE collection period and liquid
PAYMENTS OF INTEREST TO YOU authorized investments are
insufficient to cover fees, expenses
and the interest payments due with
respect to the notes on the next
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 relevant payment date, which will
reduce the yield on your notes.
THE USE OF LIQUID AUTHORIZED o If liquid authorized investments or
INVESTMENTS OR PRINCIPAL principal collections are drawn upon
COLLECTIONS TO COVER LIQUIDITY to cover shortfalls in interest, and
SHORTFALLS MAY LEAD TO PRINCIPAL there is insufficient excess income
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 ECONOMIC o The Australian economy has been
CONDITIONS MAY LEAD TO LOSSES OR experiencing a prolonged period of
DELAYS IN PAYMENTS ON YOUR NOTES expansion with 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 or delays in payments on
your notes.
CONSUMER PROTECTION LAWS MAY o Some of the housing loans are
regulated by the
21
AFFECT THE TIMING OR AMOUNT OF Consumer Credit Legislation. Under
INTEREST OR PRINCIPAL PAYMENTS that legislation, a borrower may have
TO YOU a right to apply to a court to:
o vary the terms of their housing
loan on the grounds of hardship
or that it is an unjust contract;
o reduce or cancel any interest
rate payable on the housing loan
which is unconscionable;
o have certain provisions of the
housing loan or relevant mortgage
which are in breach of the
legislation declared
unenforceable;
o obtain an order for a civil
penalty; or
o obtain restitution or
compensation, in relation to any
breaches of the Consumer Credit
Legislation in relation to the
housing loan or relevant
mortgage.
o Any such order may affect the timing
or amount of interest or principal
repayments under the relevant housing
loan, which may in turn affect the
timing or amount of interest or
principal payments to you under the
notes.
o In addition, a mortgagee's ability to
enforce a mortgage which is subject
to the Consumer Credit Legislation is
limited by various demand and notice
procedures which are required to be
followed. For example, as a general
rule enforcement cannot occur unless
the relevant default is not remedied
within 30 days after a default notice
is given. Borrowers may also be
entitled to initiate negotiations
with the mortgagee for a postponement
of enforcement proceedings. Any order
under the Consumer Credit Legislation
may affect the timing or amount of
interest or principal payments or
repayments under the relevant housing
loan, which may in turn affect the
timing or amount of interest or
principal payments or repayments to
you under the notes.
THE CONCENTRATION OF HOUSING o The trust contains a high
LOANS IN SPECIFIC GEOGRAPHIC AREAS concentration of housing loans
MAY INCREASE THE POSSIBILITY OF secured by properties located within
LOSS ON YOUR NOTES New South Wales, Victoria and
Queensland. Any deterioration in the
real estate values or 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
22
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.
23
YOU WILL NOT RECEIVE PHYSICAL o Your ownership of the notes will be
NOTES REPRESENTING YOUR NOTES, registered electronically through
WHICH CAN CAUSE DELAYS IN DTC, Euroclear and/or Clearstream,
RECEIVING DISTRIBUTIONS AND Luxembourg. The lack of physical
HAMPER YOUR ABILITY TO PLEDGE certificates could:
OR RESELL YOUR NOTES
o cause you to experience delays in
receiving payments on the notes
because the principal paying
agent will be sending
distributions on the notes to DTC
instead of directly to you;
o limit or prevent you from using
your notes as collateral; and
o hinder your ability to resell the
notes or reduce the price that
you receive for them.
SINCE THE TRUST MANAGER, THE o Each of Interstar Securitisation
ISSUER TRUSTEE AND THE SERVICER ARE Management Pty Limited, Perpetual
AUSTRALIAN ENTITIES, THERE REMAINS Trustees Victoria Limited and
UNCERTAINTY AS TO THE Interstar Securities (Australia) Pty
ENFORCEABILITY OF JUDGMENTS Limited is an Australian company and
OBTAINED BY US$ NOTEHOLDERS IN has agreed to submit to the
U.S. COURT BY AUSTRALIAN COURTS jurisdiction of the New York State
and United States federal courts for
purposes of any suit, action or
proceeding arising out of the
offering of the 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".
AN ISSUANCE OF CLASS A1 NOTES o The issuer trustee may issue Class A1
MAY AFFECT THE TIMING AND notes to fund redraws of previously
AMOUNT OF PAYMENTS MADE ON prepaid principal under the housing
THE CLASS A2 AND CLASS B1 NOTES loans if 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 and
the Class B1 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 with the Class A2
notes in all respects thereafter. If
the proceeds of enforcement of the
charge pursuant to the security trust
deed are not
24
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 or Class B1
notes is greater if any Class A1
notes are outstanding at that time.
25
THE CLASS B1 NOTES ARE o Prior to the enforcement of the
SUBORDINATED TO THE CLASS A NOTES charge under the security trust deed,
AND THEREFORE CLASS B1 the Class B1 notes will, in some
NOTEHOLDERS MAY NOT BE PAID ALL circumstances, be subordinated to the
PRINCIPAL AND INTEREST ON THE Class A2 notes in their right to
CLASS B1 NOTES receive principal payments and will
be 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 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 FROM o If there is any principal amount
PREFUNDING remaining in 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
payment date, that amount will be
applied in repayment of principal to
the noteholders in the priority
described in "Description of the
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 TO o The servicer is obligated under the
MANAGE THE INTEREST RATE EXPOSURE transaction documents to set the
MAY AFFECT THE RATE OF REPAYMENTS interest rates on the housing loans
AND THE YIELD ON YOUR INVESTMENT at a rate to ensure that at all times
the issuer trustee 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
notes.
TERMINATION PAYMENTS RELATING TO o Upon termination of a swap, a
THE CURRENCY SWAPS OR termination payment will be A due
FIXED-FLOATING RATE SWAP ARE either from the issuer trustee to the
SUBJECT TO CREDIT RISKS swap provider or vice versa. If the
swap provider is required to make a
termination payment to the issuer
trustee upon the termination of a
swap, then the trust will be exposed
to credit risk in relation to the
capacity of that swap provider to
make that termination payment.
27
CURRENCY SWAP TERMINATION o If the Class A2 currency swap or the
PAYMENT TO THE CURRENCY SWAP Class B1 currency swap terminates
PROVIDER MAY REDUCE PAYMENTS before its scheduled termination
ON YOUR US$ NOTES date, a termination payment by 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 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 Class A2 currency swap will
have an equal priority with interest
payments on the Class A notes and any
payment due by the issuer trustee
under the Class B1 currency swap will
have an equal priority with interest
payments on the Class B notes.
THIS PROSPECTUS PROVIDES o This prospectus describes only the
INFORMATION REGARDING ONLY A characteristics of the housing loan
PORTION OF THE HOUSING LOAN POOL, pool as of September 1, 2003. While
AND ADDITIONAL HOUSING LOANS they must satisfy the criteria
ADDED TO THE HOUSING LOAN POOL specified in this prospectus, the
COULD HAVE DIFFERENT housing loans acquired on the closing
CHARACTERISTICS date, and any additional housing
loans 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 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.
RATINGS OF THE US$ NOTES DO NOT o It is a condition to the issuance of
INSURE THEIR PAYMENT AND the Class A2 notes that they be rated
WITHDRAWAL OF ANY RATINGS MAY Aaa by Moody's and AAA by S&P and
that the Class B1 notes be rated at
least Aa3 by
27
AFFECT THE VALUE OF THE US$ NOTES Moody's and AA- by S&P. See "Ratings
of the Notes" below.
o 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 PERFORM o The servicer under the investment
ITS OBLIGATIONS MAY AFFECT THE management agreement has been
TIMING OF PAYMENTS ON YOUR NOTES appointed as initial servicer of the
housing loans. Following a servicer
event of default under the investment
management agreement, the issuer
trustee must immediately terminate
the investment management agreement.
Under the backup servicer
agreement, if Interstar Securities
(Australia) Pty Limited is removed as
servicer, 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 NOT o The servicer will make certain
HAVE THE CHARACTERISTICS AS SET OUT representations and warranties to the
IN THE REPRESENTATIONS AND issuer trustee, to each noteholder
WARRANTIES MADE BY THE SERVICER and to the security trustee in
relation to the housing loans to be
assigned to the issuer trustee, as at
the
28
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
AVAILABLE TO COVER ANY LOSSES trustee, takes responsibility for
SUFFERED BY YOU FOR ANY this prospectus. As a result, in the
MISLEADING STATEMENT OR event that a person suffers loss due
OMISSION OF A MATERIAL MATTER to any information contained in this
IN THIS PROSPECTUS prospectus that is inaccurate or
misleading, or omitting a material
matter or thing, that person will not
have recourse to the assets of the
trust.
YOU MAY EXPERIENCE LOSSES ON o The verification requirements for
YOUR NOTES DUE TO REDUCED Latinum Low Doc Loans and Retro Low
VERIFICATION REQUIREMENTS FOR Doc Loans, both known as the Low Doc
LOW DOC LOANS Loans, are less exhaustive than the
verification requirements for housing
loans originated through Interstar
Securities (Australia) Pty Limited's
standard approval and underwriting
process. With respect to housing
loans originated under Interstar
Securities (Australia) Pty Limited's
standard approval and underwriting
process, verification of the
borrower's income is obtained through
tax returns, employer confirmation
letters, credit checks and a full and
detailed current assets and
liabilities statement. However, the
only income verification made in
relation to a Latinum Low Doc Loan is
to confirm that the borrower's asset
and liability statement supports the
income disclosed by the borrower in
his or her loan application. There is
no income verification made in
relation to a Retro Low Doc Loan. The
reduced verification procedure for a
Low Doc Loan will make it more
difficult to assess the credit
quality of a borrower and, in
particular, the ability of that
borrower to make timely payments of
principal and interest under a Low
Doc Loan. If a borrower fails to make
such payments or fails to make such
payments on a timely basis, the
issuer trustee may not have enough
funds to make full payments of
interest and principal due on your
notes.
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
122.
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$0.6795=A$1.0000, the exchange rate as displayed
on the Bloomberg Service under AUD currency HP on September 25, 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 28, 360 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, 9 Castlereagh Street Director
Sydney, NSW, Australia
Michael Stefanovski............................... Level 7, 9 Castlereagh Street Director
Sydney, NSW, Australia
Gai McGrath....................................... Level 7, 9 Castlereagh Street Director
Sydney, NSW, Australia
Rohan Mead........................................ Level 7, 9 Castlereagh Street Director
Sydney, NSW, Australia
THE TRUST MANAGER
Interstar Securitisation Management Pty Limited was incorporated on
April 26, 2002, and continues to exist and operate as a limited liability
company under the Corporations Act 2001 of Australia. The registered office of
Interstar Securitisation Management Pty Limited is Level 28, 367 Collins Street,
Melbourne, Australia and the telephone and facsimile numbers for its registered
office are (613) 9612 1111 and (613) 9621 2368 respectively.
Interstar Securitisation Management Pty Limited has 1 share on issue
with a paid amount of A$1.00. The share is ultimately held by CPH Management
Ltd, in its capacity as responsible entity of Challenger Financial Services
Group.
31
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 CPH Management Ltd, in
its capacity as responsible entity of Challenger Financial Services Group.
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 (CAN 004 851 110), incorporated in 1970, which took place during 1999.
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 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 150 administrative, marketing, and
technical staff.
Since December 1989 and prior to this issue, Interstar Securities Pty
Limited and Interstar Securities (Australia) Pty Limited have issued
approximately A$13 billion of rated mortgage-backed securities.
As at September 15, 2003 Interstar Securities (Australia) Pty Limited
managed a housing loan portfolio of approximately A$11 billion.
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 CPH Management Ltd, in its capacity as responsible entity of Challenger
Financial Services Group.
AMPL entered into a call option arrangement with ZCM Australia Asset
Holdings (Bermuda) Limited (ZCMAH). Under the call option, ZCMAH (or any other
person to whom ZCMAH directs AMPL to transfer the shares) had the option to
acquire all of the shares in Interstar Holdings.
32
On September 1, 2003, Zurich Capital Markets (ZCM) announced that it
had entered into a sale and purchase agreement with CPH Management Ltd - in its
capacity as responsible entity of Challenger Financial Services Group - to
acquire the assets of ZCM's principal Australian financial operations. In
connection with the sale of its principal Australian financial operations, on
September 29, 2003, ZCMAH exercised its option to acquire all of the shares of
Interstar Holdings under the call option arrangement and sold all of its
interest in Interstar Holdings to CPH Management Ltd - in its capacity as
responsible entity of Challenger Financial Services Group. As a result,
Interstar Securitisation Management Pty Limited and Interstar Securities
(Australia) Pty Limited are wholly-owned subsidiaries of CPH Management Ltd.
CPH Management Ltd is the responsible entity of an Australian
listed management investment scheme, known as Challenger Financial Services
Group. Challenger Financial Services Group is the result of a merger that took
effect on July 1, 2003 between Challenger International Limited and CPH
Management Ltd - in its capacity as responsible entity for CPH Investment Corp.
Challenger Financial Services Group currently manages and administers more than
A$10 billion on behalf of over 100,000 Australian investors.
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
33
and is an Associate of the Mortgage Industry Association of
Australia. He has been responsible for marketing and origination
of mortgage loan products, liaison with loan originators and
retailers and direct contact with borrowers for Interstar
Securities Pty Limited since 1992 and for Interstar Securities
(Australia) Pty Limited since its inception.
o ANDREW MOBILIA has been a Director of Interstar Securities
(Australia) Pty Limited since its inception and is responsible for
lending and loan administration. He has been involved with all
aspects of secured lending, administration and credit control for
the past 25 years and is an Associate of the Mortgage Industry
Association of Australia. He has been responsible for all aspects
of managed asset compliance, loan review and underwriting and
arrears management for Interstar Securities Pty Limited since 1992
and for Interstar Securities (Australia) Pty Limited since its
inception.
o BRUCE BAKER has been a Director of Interstar Securities
(Australia) Pty Limited since January 2001 and is responsible for
all business development activities. He has been involved with
lending and mortgage insurance for the past 21 years and is an
Associate of the Mortgage Industry Association of Australia. He
has been National Underwriting and Business Development manager of
Interstar Securities Pty Ltd since 1994 and for Interstar
Securities (Australia) Pty Limited since its inception.
o BRIAN BENARI is the General Manager of investments for Challenger
Financial Services Group and is responsible for the Group's
investments. He is a Chartered Accountant, having trained with
Andersens and subsequently working in investment banking for JP
Morgan, Bankers Trust, Macquarie Bank and ZCM. He has over 11
years experience in investment banking, across a range of retail
and institutional vanilla and structured products in markets
including equities, debt, foreign exchange, commodity and
alternative assets.
o CHRIS CUFFE is the Chief Executive Officer of Challenger. He
entered the funds management industry in 1985, following a 5 year
period with chartered accountants Peat Marwick Mitchell & Co., now
KPMG. In 1988 he joined the newly-formed investment arm of State
Bank New South Wales, First State Fund Managers - now known as
Colonial First State Investments - and in 1990 assumed the
position of Chief Executive Officer. He left Colonial First State
Investments in early 2003.
He holds a Bachelor of Commerce in Accounting, Finance and Systems
from the University of New South Wales as well as a Diploma from
the Securities Institute of Australia. He is also a Fellow of the
Institute of Chartered Accountants in Australia, an Associate of
the Securities Institute of Australia and a Fellow of the
Australian Institute of Company Directors.
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.
34
THE SELLER
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 securitisation
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.
THE BACKUP SERVICER
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.
35
DESCRIPTION OF THE TRUST
INTERSTAR MILLENNIUM TRUSTS SECURITISATION 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
2003-5G Trust is a separate and distinct trust from any other trust established
under the master trust deed. The assets of the Interstar Millennium Series
2003-5G 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 2003-5G Trust.
INTERSTAR MILLENNIUM SERIES 2003-5G TRUST
The detailed terms of the Interstar Millennium Series 2003-5G 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.
36
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 and PMI Mortgage Insurance Ltd;
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 securitisation
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 the
seller is the beneficiary, and so Perpetual Trustees Victoria Limited is the
legal owner of all relevant housing loans. Each housing loan will be one of the
types of products described in "Interstar Residential Loan Program -- General
Features of the Housing Loans". The housing loans bear either a fixed rate of
interest or a variable rate of interest, or a combination of both. Each housing
loan is secured by a registered first ranking mortgage over the related
mortgaged property. The mortgaged properties consist of owner-occupied
properties and non-owner occupied properties, but do not include mobile homes
which are not permanently affixed to the ground, commercial properties or
unimproved land.
37
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 25% of 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 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 seller; 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 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 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 the sale notice from the seller, in its capacity as seller of the
housing loans, to the issuer trustee.
The seller will equitably assign its beneficial interest in the 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 the sale notice. Before the assignment, Perpetual Trustees Victoria
Limited will hold each of the housing loans and ancillary rights in its capacity
as trustee of a warehouse trust. After the assignment, it will hold the housing
loans and ancillary rights in its capacity as trustee of the Interstar
Millennium Series 2003-5G 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
38
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 or
PMI Mortgage Insurance Ltd for its scheduled term;
o the officers of the servicer who have responsibility for the
transactions contemplated by the transaction documents do not have
actual notice that any mortgage insurer under any mortgage
insurance policy or any title insurer under any title insurance
policy in relation to a housing loan is insolvent or will be
unable to pay a valid claim;
o there has been no fraud, dishonesty, material misrepresentation or
negligence on the part of the servicer in connection with the
selection and offer to the issuer trustee of any of the housing
loans;
o as at the applicable cut-off date, none of the housing loans were
satisfied, cancelled, discharged or rescinded and the mortgaged
property relating to each housing loan had not been released from
the relevant mortgage;
o the housing loans are assignable and all consents required in
relation to the assignment of the housing loans and ancillary
rights have been obtained;
o between the applicable cut-off date and the closing date the
servicer dealt with the housing loans in the ordinary course of
its business;
o as of the applicable cut-off date, each housing loan satisfies the
following eligibility criteria:
o it is denominated and payable only in Australian dollars in
Australia;
o the interest rate applicable to the housing loan is either:
o a variable rate based upon any determinant as may be
considered appropriate by the servicer in its absolute
discretion;
o a fixed rate provided that:
o the fixed rate does not apply for a continuous period
exceeding five years from:
o the settlement date of the housing loan, where the
housing loan bears a fixed rate of interest from the
date it is settled; or
39
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 seller and the servicer; and
o prepared in accordance with applicable Consumer Credit
Legislation;
o with respect to housing loans acquired by the issuer trustee and
included in the housing loan pool:
o at least 90% of the aggregate mortgaged property of all
housing loans held by the issuer trustee will be located in
metropolitan areas of the capital cities and major regional
centers of Australia; and
o not more than 15% of the aggregate amount outstanding under
the housing loans will comprise individual housing loans each
with an amount outstanding exceeding A$500,000 and secured by
a mortgage over a single property;
o the 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;
40
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 seller in equity without prior consent being
required from, or notice of the assignment needing to be given to,
the mortgagor, the borrower or any other person;
o the loan agreement and the mortgage securing the housing loan have
been duly authorized and are in full force and effect and
constitute legal, valid and binding obligations of the relevant
borrower and mortgagor enforceable against that borrower and
mortgagor in accordance with their terms and are not subject to
any dispute, offset or counterclaim;
o the housing loan is covered by a valid, binding and enforceable
mortgage insurance policy;
o the housing loan has a borrower -- and where the servicer 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 September 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;
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 in the case of a housing loan other than a Low Doc Loan, the
amount secured or to be secured by the mortgage does not
exceed A$1,500,000;
o in the case of a Latinum Low Doc Loan, the amount secured or
to be secured by the mortgage does not exceed A$600,000;
o in the case of a Retro Low Doc Loan, the amount secured or to
be secured by the mortgage does not exceed:
41
o where the mortgaged property is property within the
metropolitan areas of Australia other than Tasmania or the
Northern Territory -- A$500,000; or
o where the mortgaged property is property within the
metropolitan areas of Tasmania or the Northern Territory
or within the regional centers of Australia -- A$300,000;
o in respect of a mortgage:
o to secure a housing loan, other than a Low Doc Loan, for a
principal amount:
o not exceeding A$300,000-- the loan-to-value ratio in
respect of that housing loan does not exceed 95%; and
o exceeding A$300,000 but not exceeding A$500,000 -- the
loan-to-value ratio in respect of that housing loan
does not exceed 90%; and
o exceeding A$500,000 but not exceeding A$1,000,000 --
the mortgaged property must constitute a single
property within the metropolitan areas of Sydney,
Melbourne, Brisbane, Adelaide or Perth and the
loan-to-value ratio in respect of that housing loan
does not exceed 80%; and
o exceeding A$1,000,000 but not exceeding A$1,250,000 --
the mortgaged property must constitute a single
property within the metropolitan areas of Melbourne or
Sydney and the loan-to-value ratio in respect of that
housing loan does not exceed 75%; and
o exceeding A$1,250,000 -- the mortgaged property must
constitute a single property within the metropolitan
areas of Melbourne or Sydney and the loan-to-value
ratio in respect of that housing loan does not exceed
65%;
o to secure a Latinum Low Doc Loan for a principal amount
of:
o not exceeding A$500,000 -- the mortgaged property must
constitute a single property within the metropolitan
areas or regional centers of Australia and the
loan-to-value ratio in respect of that housing loan
does not exceed 80%;
o exceeding A$500,000 but not exceeding A$600,000 -- the
mortgaged property must constitute more than one
property, each being within the metropolitan areas or
regional centers of Australia and the loan-to-value
ratio in respect of that housing loan does not exceed
80%;
o to secure a Retro Low Doc Loan, 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%;
42
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. See "Interstar Residential Loan
Program -- Approval and Underwriting Process" for a description of Low Doc
Loans, Latinum Low Doc Loans and Retro Low Doc Loans.
BREACH OF REPRESENTATIONS AND WARRANTIES
If the 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 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 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 seller shall hold the beneficial interest in such housing loan and
mortgage and be entitled to all interest and fees that are paid in respect of
them from, and including, the date of repurchase.
OTHER FEATURES OF THE HOUSING LOANS
The housing loans have the following features:
o interest is calculated daily and charged monthly in arrears;
o payments can be on a monthly, bi-weekly or weekly basis. Payments
from borrowers are made by electronic funds transfer directly from
each borrower's bank account to a trust drawings account at
National Australia Bank Limited; and
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;
43
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 September 1, 2003. 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 the seller may substitute loans proposed for sale with
other eligible housing loans or add additional eligible housing loans. The
seller may do this if, for example, the loans originally selected are repaid
early.
The 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 first table on
page 38, unless a revised prospectus is delivered to prospective investors.
44
HOUSING LOAN INFORMATION
ANALYSIS OF THE HOUSING LOAN POOL
Total pool size................................................ $1,251,126,743
Total number of loans.......................................... 5,546
Average loan size.............................................. $225,590.83
Maximum loan size.............................................. $1,249,929.16
Total property value (current)................................. $1,800,194,286
Weighted Average current LVR................................... 74.11%
% of pool with loans > 80% LVR................................. 44.30%
Weighted Average Term to Maturity (months)..................... 344.72
Weighted Average Seasoning (months)............................ 2.29
Weighted Average Borrower Rate 6.59
Maximum Remaining Term to Maturity (months).................... 349
% of pool with loans > $300,000 (by number).................... 22.95%
% of pool with loans > $300,000 (by loan amount)............... 40.74%
% of pool in arrears (by loan amount):
1-30 days...................................................... 1.31%
31-60 days..................................................... 0.00%
61+ days....................................................... 0.00%
Total....................................................... 1.31%
HOUSING LOANS BY OCCUPANCY
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
Owner Occupied - House........ 2,770 49.95% 590,328,258 47.18% 213,115 71.52%
Owner Occupied - Unit......... 376 6.78% 78,379,651 6.26% 208,457 74.81%
Investment - House............ 1,549 27.93% 380,393,112 30.40% 245,573 75.93%
Investment - Unit............. 851 15.34% 202,025,722 16.15% 237,398 77.92%
----- ------ ------------- ------ ------- -----
Total....................... 5,546 100.00% 1,251,126,743 100.00% 225,591 74.11%
===== ====== ============= ====== ======= =====
45
HOUSING LOANS BY LVR (LOAN-TO-VALUE RATIO)
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
<=20%......................... 105 1.89% 4,890,239 0.39% 46,574 14.91%
>20% and =<25%................ 43 0.78% 4,138,535 0.33% 96,245 22.65%
>25% and =<30%................ 56 1.01% 6,579,872 0.53% 117,498 27.61%
>30% and =<35%................ 74 1.33% 8,856,594 0.71% 119,684 32.34%
>35% and =<40%................ 90 1.62% 12,729,538 1.02% 141,439 37.56%
>40% and =<45%................ 90 1.62% 15,655,913 1.25% 173,955 42.61%
>45% and =<50%................ 149 2.69% 29,133,217 2.33% 195,525 47.82%
>50% and =<55%................ 211 3.80% 41,695,488 3.33% 197,609 52.65%
>55% and =<60%................ 267 4.81% 57,915,875 4.63% 216,913 57.48%
>60% and =<65%................ 310 5.59% 69,650,873 5.57% 224,680 62.76%
>65% and =<70%................ 397 7.16% 88,277,522 7.06% 222,362 67.01%
>70% and =<75%................ 430 7.75% 106,191,595 8.48% 246,957 72.49%
>75% and =<80%................ 1,045 18.84% 251,136,980 20.07% 240,322 78.24%
>80% and =<85%................ 1,422 25.64% 348,961,983 27.90% 245,402 80.34%
>85% and =<90%................ 857 15.45% 205,312,519 16.41% 239,571 89.37%
----------- ------------ -------------- ----------- ----------- -------------
Total....................... 5,546 100.00% 1,251,126,743 100.00% 225,591 74.11%
=========== ============ ============== =========== =========== =============
HOUSING LOANS BY PRODUCT TYPES
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
Variable - Principal & Interest 2,774 50.02% 603,526,893 48.23% 217,566 73.42%
Variable - Interest Only...... 2,522 45.47% 614,421,143 49.12% 243,625 75.07%
Variable - Line of Credit..... 250 4.51% 33,178,707 2.65% 132,715 68.63%
Fixed......................... 0 0.00% 0 0.00% 0 0.00%
Total....................... ----------- ------------ --------------- ---------- ------------ -----------
5,546 100.00% 1,251,126,743 100.00% 225,591 74.11%
=========== ============ =============== ========== ============ ===========
46
HOUSING LOANS BY GEOGRAPHICAL DISTRIBUTION
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
NSW (Metro)................... 1,758 31.70% 506,000,704 40.44% 287,827 73.31%
NSW (Regional)................ 318 5.73% 74,626,514 5.96% 234,675 73.83%
NSW (Country)................. 185 3.34% 32,057,504 2.56% 173,284 70.86%
ACT (Metro)................... 78 1.41% 17,599,328 1.41% 225,632 75.42%
ACT (Regional)................ 0 0.00% 0 0.00% 0 0.00%
ACT (Country)................. 0 0.00% 0 0.00% 0 0.00%
VIC (Metro)................... 954 17.20% 221,173,472 17.68% 231,838 74.29%
VIC (Regional)................ 33 0.60% 4,045,151 0.32% 122,580 70.16%
VIC (Country)................. 286 5.16% 51,229,379 4.09% 179,124 74.07%
QLD (Metro)................... 496 8.94% 99,194,794 7.93% 199,990 76.82%
QLD (Regional)................ 553 9.97% 109,367,568 8.74% 197,771 74.38%
QLD (Country)................. 59 1.06% 7,907,137 0.63% 134,019 76.79%
SA (Metro).................... 547 9.86% 80,232,681 6.41% 146,678 75.65%
SA (Regional)................. 0 0.00% 0 0.00% 0 0.00%
SA (Country).................. 45 0.81% 6,006,266 0.48% 133,473 76.87%
WA (Metro).................... 7 0.13% 1,851,511 0.15% 264,502 67.72%
WA (Regional)................. 0 0.00% 0 0.00% 0 0.00%
WA (Country).................. 216 3.89% 38,243,552 3.06% 177,053 74.81%
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).................... 9 0.16% 1,202,310 0.10% 133,590 80.82%
NT (Regional)................. 0 0.00% 0 0.00% 0 0.00%
NT (Country).................. 2 0.04% 388,872 0.03% 194,436 68.33%
Total....................... ------------ ------------ -------------- --------- ------------ ------------
5,546 100.00% 1,251,126,743 100.00% 225,591 74.11%
============ ============ ============== ========= ============ ============
HOUSING LOANS BY LOAN SIZE
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
<=100,000..................... 709 12.78% 43,481,287 3.48% 61,328 60.67%
> 100,000 and <= 150,000...... 901 16.25% 113,822,375 9.10% 126,329 68.62%
> 150,000 and <= 200,000...... 990 17.85% 172,409,013 13.78% 174,151 73.11%
> 200,000 and <= 250,000...... 933 16.83% 208,513,072 16.66% 223,487 75.33%
> 250,000 and <= 300,000...... 740 13.34% 203,178,692 16.23% 274,566 76.73%
> 300,000 and <= 350,000...... 437 7.88% 140,608,038 11.24% 321,758 76.07%
> 350,000 and <= 400,000...... 335 6.04% 124,742,286 9.97% 372,365 76.08%
> 400,000 and <= 500,000...... 338 6.09% 149,948,840 11.99% 443,636 75.75%
> 500,000 and <= 750,000...... 151 2.72% 83,858,513 6.70% 555,354 72.27%
> 750,000 and <= 950,000...... 9 0.16% 7,140,674 0.57% 793,408 75.35%
> 950,000..................... 3 0.05% 3,423,953 0.27% 1,141,318 64.92%
Total....................... ------------ ------------ -------------- --------- ------------ ------------
5,546 100.00% 1,251,126,743 100.00% 225,591 74.11%
============ ============ ============== ========= ============ ============
47
HOUSING LOANS BY POSTCODE CONCENTRATION --
TOP 10 BY LOAN AMOUNT
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
POST-CODE LOANS OF LOANS A$ AMOUNT A$ LVR %
--------- ----- -------- -- ------ -- -----
Liverpool South............ 2170 56 1.01% 14,874,256 1.19% 265,612 75.69%
St Johns Park.............. 2168 55 0.99% 13,154,480 1.05% 239,172 72.90%
Strathfield................ 2145 43 0.78% 12,253,399 0.98% 284,963 74.57%
Broadbeach................. 2043 40 0.72% 11,327,482 0.91% 283,187 80.38%
Arndell Park............... 2155 27 0.49% 10,667,390 0.85% 395,089 80.00%
Greystanes................. 2560 43 0.78% 9,669,820 0.77% 224,880 75.72%
Kerrydale.................. 4211 45 0.81% 9,021,050 0.72% 200,468 74.06%
Cabramatta................. 2166 45 0.81% 8,788,280 0.70% 195,295 75.28%
Guildford West............. 2176 32 0.58% 8,786,001 0.70% 274,563 75.10%
Chirn Park................. 2770 39 0.70% 8,490,588 0.68% 217,707 81.64%
Total.................... ---------- ---------- -------------- --------- ---------- -----------
425 7.66% 107,032,747 8.55% 251,842 76.40%
========== ========== ============== ========= ========== ===========
HOUSING LOANS BY LOAN SEASONING
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
<= 3 months................... 4,800 86.54% 1,089,071,086 87.05% 226,890 73.66%
> 3 and <= 6 months........... 598 10.78% 126,616,149 10.12% 211,733 74.98%
> 6 and <= 12 months.......... 139 2.51% 33,567,712 2.68% 241,494 85.64%
> 12 and <= 18 months......... 7 0.13% 1,309,055 0.10% 187,008 68.24%
> 18 and <= 24 months......... 1 0.02% 500,218 0.04% 500,218 76.96%
> 24 and <= 36 months......... 0 0.00% 0 0.00% 0 0.00%
> 36 and <= 48 months......... 0 0.00% 0 0.00% 0 0.00%
> 48 and <= 60 months......... 1 0.02% 62,523 0.01% 62,523 27.79%
> 60.......................... 0 0.00% 0 0.00% 0 0.00%
Total....................... ------------ ----------- -------------- ---------- ------------ ------------
5,546 100.00% 1,251,126,743 100.00% 225,591 74.11%
============ =========== ============== ========== ============ ============
HOUSING LOANS BY MATURITY
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
October 15, 2022.............. 0 0.00% 0 0.00% 0 0.00%
October 15, 2023.............. 1 0.02% 62,523 0.00% 62,523 27.79%
October 15, 2028.............. 62 1.12% 11,976,210 0.96% 193,165 75.35%
October 15, 2030.............. 329 5.93% 78,384,653 6.27% 238,251 75.33%
October 15, 2031.............. 1,066 19.22% 241,488,621 19.31% 226,537 75.19%
October 15, 2032.............. 4,088 73.71% 919,214,735 73.47% 224,857 73.70%
Total....................... ------------ ---------- --------------- ---------- ------------ ------------
5,546 100.00% 1,251,126,742 100.00% 225,591 74.11%
============ ========== =============== ========== ============ ============
48
HOUSING LOANS BY MORTGAGE INSURER
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
PMI Mortgage Insurance........ 408 7.36% 103,991,120 8.31% 254,880 73.65%
GE Capital Mortgage Insurance. 4,263 76.87% 946,600,183 75.66% 222,050 74.39%
PMI Indemnity................. 875 15.78% 200,535,440 16.03% 229,183 73.01%
Total....................... ------------ ----------- -------------- ---------- ------------ ------------
5,546 100.00% 1,251,126,743 100.00% 225,591 74.11%
============ =========== ============== ========== ============ ============
HOUSING LOANS BY MORTGAGE INSURER AND LVR
PMI MORTGAGE INSURANCE
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
<=20%......................... 11 2.69% 578,542 0.56% 52,595 15.88%
>20% and =<25%................ 6 1.47% 535,422 0.51% 89,237 23.73%
>25% and =<30%................ 5 1.23% 669,417 0.64% 133,883 27.51%
>30% and =<35%................ 8 1.96% 1,141,630 1.10% 142,704 32.34%
>35% and =<40%................ 4 0.98% 1,166,442 1.12% 291,611 38.58%
>40% and =<45%................ 4 0.98% 1,013,205 0.97% 253,301 43.44%
>45% and =<50%................ 7 1.72% 1,623,688 1.56% 231,955 48.34%
>50% and =<55%................ 12 2.94% 2,799,651 2.69% 233,304 52.96%
>55% and =<60%................ 14 3.43% 4,368,319 4.20% 312,023 58.12%
>60% and =<65%................ 25 6.13% 7,772,077 7.47% 310,883 62.94%
>65% and =<70%................ 29 7.11% 7,837,195 7.54% 270,248 67.40%
>70% and =<75%................ 28 6.86% 6,783,978 6.52% 242,285 72.12%
>75% and =<80%................ 85 20.83% 23,993,264 23.08% 282,274 78.23%
>80% and =<85%................ 115 28.19% 30,075,198 28.93% 261,523 80.24%
>85% and =<90%................ 55 13.48% 13,633,092 13.11% 247,874 89.17%
Total....................... ------------ ----------- -------------- ---------- ------------ ------------
408 100.00% 103,991,120 100.00% 254,880 73.65%
============ =========== ============== ========== ============ ============
49
MORTGAGE LOANS BY MORTGAGE INSURER AND LVR
PMI INDEMNITY
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
<=20%......................... 14 1.60% 498,341 0.25% 35,596 11.96%
>20% and =<25%................ 4 0.46% 711,056 0.35% 177,764 21.72%
>25% and =<30%................ 10 1.14% 1,286,143 0.64% 128,614 27.72%
>30% and =<35%................ 12 1.37% 1,353,126 0.67% 112,761 32.99%
>35% and =<40%................ 24 2.74% 2,803,301 1.40% 116,804 37.66%
>40% and =<45%................ 17 1.94% 3,074,430 1.53% 180,849 42.33%
>45% and =<50%................ 34 3.89% 8,264,963 4.12% 243,087 47.74%
>50% and =<55%................ 31 3.54% 6,265,266 3.12% 202,105 52.30%
>55% and =<60%................ 41 4.69% 9,228,956 4.60% 225,096 57.02%
>60% and =<65%................ 50 5.71% 10,359,820 5.17% 207,196 62.68%
>65% and =<70%................ 66 7.54% 15,122,004 7.54% 229,121 66.89%
>70% and =<75%................ 63 7.20% 17,554,224 8.75% 278,638 72.56%
>75% and =<80%................ 165 18.86% 40,964,453 20.45% 248,269 78.18%
>80% and =<85%................ 217 24.81% 55,036,410 27.44% 253,624 80.29%
>85% and =<90%................ 127 14.51% 28,012,947 13.97% 220,574 89.20%
Total....................... ------------ ----------- ------------- ------------ ----------- ------------
875 100.00% 200,535,440 100.00% 229,183 73.01%
============ =========== ============= ============ =========== ============
MORTGAGE LOANS BY MORTGAGE INSURER AND LVR
GE CAPITAL MORTGAGE INSURANCE
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
<=20%......................... 80 1.88% 3,813,356 0.40% 47,667 15.15%
>20% and =<25%................ 33 0.77% 2,892,058 0.31% 87,638 22.68%
>25% and =<30%................ 41 0.96% 4,624,311 0.49% 112,788 27.59%
>30% and =<35%................ 54 1.27% 6,361,838 0.67% 117,812 32.21%
>35% and =<40%................ 62 1.45% 8,759,796 0.93% 141,287 37.40%
>40% and =<45%................ 69 1.62% 11,568,277 1.22% 167,656 42.61%
>45% and =<50%................ 108 2.53% 19,244,565 2.03% 178,190 47.81%
>50% and =<55%................ 168 3.94% 32,630,571 3.45% 194,230 52.69%
>55% and =<60%................ 212 4.97% 44,318,601 4.68% 209,050 57.51%
>60% and =<65%................ 235 5.51% 51,518,976 5.44% 219,230 62.75%
>65% and =<70%................ 302 7.08% 65,318,322 6.90% 216,286 67.00%
>70% and =<75%................ 339 7.95% 81,853,395 8.65% 241,455 72.50%
>75% and =<80%................ 795 18.65% 186,179,261 19.67% 234,188 78.26%
>80% and =<85%................ 1,090 25.57% 263,850,376 27.87% 242,065 80.36%
>85% and =<90%................ 675 15.83% 163,666,480 17.29% 242,469 89.41%
Total....................... ------------ ----------- -------------- ----------- ----------- ------------
4,263 100.00% 946,600,183 100.00% 222,050 74.39%
============ =========== ============== =========== =========== ============
50
HOUSING LOANS BY CURRENT COUPON RATES
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
<= 5.00....................... 4 0.07% 847,908 0.07% 211,977 62.87%
> 5.01 and <= 5.50............ 29 0.52% 6,048,375 0.48% 208,565 74.31%
> 5.51 and <=6.00............. 1,148 20.71% 267,610,632 21.39% 233,110 71.87%
> 6.01 and <= 6.50............ 1,835 33.09% 421,009,227 33.65% 229,433 76.56%
> 6.51 and <= 7.00............ 1,181 21.29% 258,146,261 20.63% 218,583 72.08%
> 7.01 and <= 7.50............ 1,075 19.38% 238,734,767 19.08% 222,079 73.99%
> 7.51 and <= 8.00............ 222 4.00% 47,740,165 3.82% 215,046 76.31%
> 8.00........................ 52 0.94% 10,989,408 0.88% 211,335 76.00%
----------- ---------- ---------------- ---------- ------------ ---------
Total....................... 5,546 100.00% 1,251,126,743 100.00% 225,591 74.11%
=========== ========== ================ ========== ============ =========
HOUSING LOANS BY MONTHS REMAINING TO MATURITY
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
241-252 Months................ 1 0.02% 62,523 0.00% 62,523 27.79%
253-264 Months................ 0 0.00% 0 0.00% 0 0.00%
265-276 Months................ 0 0.00% 0 0.00% 0 0.00%
277-288 Months................ 0 0.00% 0 0.00% 0 0.00%
289-300 Months................ 0 0.00% 0 0.00% 0 0.00%
301-312 Months................ 62 1.12% 11,976,210 0.96% 193,165 75.35%
313-324 Months................ 0 0.00% 0 0.00% 0 0.00%
325-336 Months................ 329 5.93% 78,384,654 6.27% 238,251 75.33%
337-348 Months................ 1,066 19.22% 241,488,621 19.30% 226,537 75.19%
349-360 Months................ 4,088 73.71% 919,214,735 73.47% 224,857 73.70%
----------- ---------- ----------------- ---------- ---------- -----------
Total....................... 5,546 100.00% 1,251,126,743 100.00% 225,591 74.11%
=========== ========== ================= ========== ========== ===========
51
HOUSING LOANS BY INTEREST ONLY PERIOD REMAINING
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
-------- ----------- --------------- ---------- --------- -----------
0-1 Year ........... 56 2.02% 15,782,803 2.44% 281,836 75.39%
1-2 Years .......... 46 1.66% 12,141,787 1.87% 263,952 76.70%
2-3 Years .......... 33 1.19% 8,326,879 1.29% 252,330 81.42%
3-4 Years .......... 4 0.14% 899,047 0.14% 224,762 83.73%
4-5 Years .......... 1,693 61.08% 393,558,607 60.77% 232,462 76.05%
5-6 Years .......... 0 0.00% 0 0.00% 0 0.00%
6-7 Years .......... 2 0.07% 546,063 0.08% 273,032 65.72%
7-8 Years .......... 0 0.00% 0 0.00% 0 0.00%
8-9 Years .......... 0 0.00% 0 0.00% 0 0.00%
9-10 Years ......... 938 33.84% 216,344,663 33.41% 230,645 71.93%
----- ------ ----------- ------ ------- -----
Total ............. 2,772 100.00% 647,599,849 100.00% 233,622 74.74%
===== ====== =========== ====== ======= =====
HOUSING LOANS BY LOAN TYPE
NUMBER % OF % OF WGT AVG
OF TOTAL NO. DOLLAR TOTAL $ AVERAGE CURRENT
LOANS OF LOANS AMOUNT AMOUNT BALANCE LVR %
----- -------- ------ ------ ------- -----
Standard...................... 3,273 59.02% 739,642,009 59.12% 225,983 74.77%
Latinum Low Doc............... 2,012 36.28% 465,366,113 37.20% 231,295 74.60%
Retro Low Doc................. 261 4.71% 46,118,621 3.69% 176,700 58.49%
Total....................... ------------ ----------- -------------- ---------- ------------ ------------
5,546 100.00% 1,251,126,743 100.00% 225,591 74.11%
============ =========== ============== ========== ============ ============
52
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 seller 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. However, the level of verification will be less
for Low Doc Loans, as described below. The initial assessment of the applicant
is conducted by the mortgage broker on behalf of Interstar Securities
(Australia) Pty Limited, with the application then being submitted for approval,
to Interstar Securities (Australia) Pty Limited based upon it meeting
satisfactory credit standards. Approval of the loan application is at the total
discretion of Interstar Securities (Australia) Pty Limited.
All proposed security properties are required to be valued, subject to
a number of exceptions, by a valuer approved by Interstar Securities (Australia)
Pty Ltd. See "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.
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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.
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.
Verification of an applicant's information is central to the approval
process. The mortgage broker obtains such information as:
o in the case of all housing loans apart from Low Doc Loans, tax
returns and an employer confirmation letter;
o in the case of all housing loans, credit checks; and
o in the case of all housing loans other than Retro Low Doc Loans, 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 Latinum Low Doc Loan and Retro Low Doc Loan products, the LOW DOC
LOANS, are made available by Interstar Securities (Australia) Pty Limited to
self-employed borrowers and full-time investors who are unable to provide
financial statements or tax returns at the time of applying for a housing loan.
In the case of a Latinum Low Doc Loan, an applicant must have been self-employed
or a full-time investor for at least 2 years and must have net assets,
post-settlement of the housing loan, of not less than A$50,000. There are no
such minimum requirements in relation to a Retro Low Doc Loan. The income
verification requirements for a Low Doc Loan are less exhaustive than the
verification requirements for housing loans originated through Interstar
Securities (Australia) Pty Limited's standard approval and underwriting process.
54
In a Latinum Low Doc Loan application, the applicant must disclose his
or her income and is required to execute a declaration stating that the
information in the application is accurate. The applicant is also required to
acknowledge in the application that Interstar Securities (Australia) Pty Limited
will rely on the information in the application in making a decision as to
whether to approve the housing loan. The only income verification made in
relation to a Latinum Low Doc Loan is to confirm that the applicant's asset and
liability statement supports the income disclosed by the applicant in the loan
application.
There is no income verification made in relation to a Retro Low Doc
Loan.
The lending criteria for Low Doc Loans are the same as the lending
criteria for other housing loans originated through Interstar Securities
(Australia) Pty Limited's standard underwriting process, with the exception of
limitations placed on maximum loan amounts and loan-to-value ratios. See "--
Representations, Warranties and Eligibility Criteria".
Upon acceptance of the loan application by Interstar Securities
(Australia) Pty Limited, mortgage insurance coverage must be obtained by the
borrower. All loans through Interstar Securities (Australia) Pty Limited must
have 100% mortgage insurance coverage with the appropriate cash flow cover. This
mortgage insurance coverage remains in force from the date of settlement until
the earliest of discharge, full repayment of the housing loan or payment of a
claim. Full details of the mortgage insurance companies and their respective
ratings are set out separately in this prospectus.
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 a loan
agreement document together with a general terms and conditions booklet. Upon
receipt of the executed mortgage documentation, certification of title will then
occur and settlement will take place. Upon settlement, the mortgage is
registered and the documents stored in the safe custody of the issuer trustee. A
condition of settlement is that the mortgagor establish and maintain full
replacement property insurance on the security property for the term of the
housing loan.
Interstar Securities (Australia) Pty Limited's credit policies and
approval procedures are subject to constant review. Improvements in procedures
are continuous. Credit policy may change from time to time due to business
conditions and legal or regulatory changes.
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GENERAL FEATURES OF THE HOUSING LOANS
The housing loans may consist of one or more of the following types:
Name of Housing Loan General Characteristics of Housing
Loan
Interstar "Premium"
Access Account Amortizing principal and
interest repayment (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"
Access Account Amortizing "P&I" loans with
an interest rate 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"
Access Account Non-amortizing loans
requiring interest only 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"
Access Account Non-amortizing loans
requiring interest only 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"
loans with an interest rate variable
at the discretion of the servicer.
Interstar "Line of Credit"
Access Account Amortizing line of credit
"P&I" loans with an interest rate
variable at the discretion of the
servicer, and incorporating
facilities that allow borrowers to:
o draw funds up to a pre-
determined amortizing limit;
o repay some or all of those
funds; and
o redraw those funds again up to
the then-current amortized
limit subject always to such
right to redraw funds being at
the absolute discretion of the
servicer, during the life of
the loan facility.
Interstar "Split"
Access Account A combined facility which:
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.
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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 on application by the borrower, 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;
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 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.
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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.
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 or PMI Mortgage
Insurance Ltd. 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;
58
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.
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.
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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 MORTGAGE INSURANCE LTD AND PMI INDEMNITY LIMITED (FORMERLY CGU LENDERS
MORTGAGE INSURANCE LIMITED)
PMI Mortgage Insurance Ltd, previously known as MGICA Ltd, has been
providing lenders' mortgage insurance in Australia since 1965 and in New Zealand
since 1988. It is currently Australia's second largest lenders' mortgage insurer
with a market share of approximately 33 percent.
PMI Mortgage Insurance Ltd's parent is PMI Mortgage Insurance Australia
(Holdings) Pty Ltd, a subsidiary of PMI Mortgage Insurance Co. which is a
subsidiary of the PMI Group Inc. PMI Mortgage Insurance Co. is a leading
monoline mortgage insurer in the United States currently having an insurer
financial strength rating of AA+ (negative) by S&P, AA+(stable) by Fitch Ratings
and Aa2 by Moody's.
As of December 31, 2002, PMI Mortgage Insurance Ltd insures
approximately 482,417 mortgage loans in excess of A$57.9 billion and had total
assets of A$535 million, shareholders' equity of A$287 million. PMI Mortgage
Insurance Ltd currently has a financial strength rating of AA (negative) by S&P,
AA (stable) by Fitch Ratings and Aa3 by Moody's.
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. On September 14, 2001, PMI Indemnity Limited was acquired by PMI
Mortgage Insurance Australia (Holdings) Pty Ltd.
As of December 31, 2002, PMI Indemnity Limited insures approximately
232,965 mortgage loans in excess of A$27.0 billion and had total assets of $196
million and shareholders' equity of A$106 million. PMI Indemnity Limited
currently has an insurer financial strength rating of AA- (negative) by S&P, AA
(stable) by Fitch Ratings and Aa3 by Moody's.
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. Since
September 14, 2001, PMI Indemnity Limited's obligations to its policy holders
has been managed by PMI Mortgage Insurance Ltd. PMI Indemnity Limited ceased
(except for increased advances on current insurance in force) writing new
business from July 1, 2002. Insurance in force as at July 1, 2002 will be
maintained.
The PMI Group Inc. currently has an AA (negative) counterparty credit
rating from S&P. As of May 1, 2003, S&P has revised its outlook on the PMI Group
Inc. and its rated subsidiaries, including PMI Mortgage Insurance Ltd and PMI
Indemnity Limited, from "stable" to "negative". If
60
S&P lowers its credit rating on PMI Indemnity Limited or PMI Mortgage Insurance
Ltd below AA-, then S&P could lower its rating on the Class B1 notes. No
assurances are given regarding any future outlook or the future levels of the
credit ratings of each of The PMI Group Inc., PMI Mortgage Insurance Ltd and PMI
Indemnity Limited by any of S&P, Moody's or Fitch Ratings.
The business address of each of PMI Mortgage Insurance Ltd and PMI
Indemnity Limited is Level 23, 50 Bridge Street, Sydney, New South Wales.
GE CAPITAL MORTGAGE INSURANCE CORPORATION (AUSTRALIA) PTY LTD
GE Capital Mortgage Insurance Corporation (Australia) Pty Ltd,
commenced operations in March 1998. It is a wholly-owned subsidiary of GE
Capital Australia Limited, whose ultimate parent is General Electric Company.
General Electric Company is a diversified industrial and financial services
company with operations in over 100 countries. General Electric Company is
currently rated AAA by S&P and Aaa by Moody's. General Electric Company is the
indirect owner of lenders' mortgage insurance businesses in the United States,
United Kingdom, Canada and Australia which collectively insured over US$165
billion of loans worldwide.
As of December 31, 2002, GE Capital Mortgage Insurance Corporation
(Australia) Pty Ltd had total assets of A$604.8 million, shareholders' equity of
A$206.1 million and statutory reserves -- claims equalization reserve -- of
A$21.7 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 business address of GE Capital Mortgage Insurance Corporation
(Australia) Pty Ltd is Level 23, 259 George Street, Sydney, New South Wales.
61
THE TITLE INSURANCE POLICIES
COVER
Some housing loans that are acquired may be secured by mortgages which
will be the subject of a title insurance policy. Title insurance provides 100%
coverage for losses arising, among other things, as a result of a relevant
mortgage:
o being subject to any prior encumbrance;
o not being validly registered; or
o being invalid or unenforceable.
The issuer trustee will be the insured party under each title insurance
policy in respect of each mortgage securing a housing loan.
The insurer for any housing loan insured under a title insurance policy
will be:
o First American Title Insurance Company of Australia Pty Limited;
or
o any other entity approved from time to time by the trust manager
and which each rating agency has confirmed will not cause a
downgrade or withdrawal of the rating of any note.
The trust manager will undertake:
o not to take any action in respect of a housing loan where such
action would be contrary to the terms of the title insurance
policy covering that housing loan unless it is approved by the
relevant title insurer; and
o to take such steps as are reasonably available to it to ensure
that a title insurer is not relieved from its liability under its
title insurance policy.
PERIOD OF COVER
The title insurance policy in respect of each mortgage securing a
housing loan commences on the date that the relevant title insurance policy for
that mortgage is issued and continues for so long as:
o the issuer trustee owns the relevant mortgage;
o the issuer trustee retains an estate or interest in the relevant
mortgage; or
o the issuer trustee, as a mortgagee exercising its power of sale,
has a liability to a purchaser regarding the title to the land
under a contract of sale for the land or the issuer trustee holds
a debt secured by a mortgage given to the issuer trustee by a
purchaser of the land.
The policy also continues to provide protection if:
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;
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o a successor acquires an interest in the relevant mortgage; or
o a successor acquires the relevant mortgage or the estate or
interest in the relevant property by operation of law and not
purchase.
REFUSAL OR REDUCTION IN CLAIM
Title insurance policies may not provide cover, or may provide a
reduced amount of cover, for losses arising as a result of, among other things:
o any material misstatement, omission or misrepresentation in
connection with obtaining the policies; or
o any material breach of the terms and conditions of the policies.
EXCLUSIONS
The title insurer will not provide cover under the title insurance
policy resulting from, among other things:
o restrictions or rights that are noted on the title to the land on
the policy date;
o the existence of laws which restrict or prohibit the use of the
land or the breach of those laws;
o environmental contaminants or hazardous waste under the land;
o native title claims in relation to the land;
o risks which:
o the insured at any time created, allowed or agreed to;
o were known to the insured but not to the title insurer on or
prior to the policy date;
o cause no loss to the insured;
o come into existence or are recorded in any public records
after the date upon which the relevant mortgage is registered;
or
o result in any loss of priority because the insured makes
further advances despite knowing the existence of subsequent
charges;
o if the relevant mortgage is or is claimed to be unenforceable
or otherwise affected because the insured failed to comply
with or breached the Consumer Credit Legislation or laws
relating to the doing of business and the providing of credit;
or
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.
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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$4.7 billion and approximately 24,886 employees worldwide in
2002. First American Title Insurance Company is publicly traded on the New York
Stock Exchange through its holding company, the First American Financial
Corporation.
A.M. Best Company, an insurance company ratings and information agency,
affirmed in 2002 the current rating for First American Title Insurance Company
of Australia Pty Limited of A+ (Superior). A.M. Best Company evaluates title
insurers from both an insurance and general industry perspective.
First American Title Insurance Company and First American Financial
Corporation have a rating of "A-" from S&P. First American Financial
Corporation's senior debt is rated "stable" by S&P.
DESCRIPTION OF THE US$ 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 notes
(including the US$ notes). The summary does not purport to be complete and is
subject to the terms and conditions of the transaction documents, any
fixed-floating rate swaps 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
64
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 limited-purpose trust company organized under the New York Banking
Law;
o "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).
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
65
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 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.
66
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,
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, 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.
67
DEFINITIVE NOTE
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 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 any fixed-floating rate swaps and the
currency swaps;
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 quarterly basis on each
payment date. On each 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 payment date if the US$ notes are held in book-entry
68
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 payment date or
transferred to a US$ account maintained by the US$ noteholder with a bank in New
York City.
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 payment date, the period from, and including, the date which
is 6 business days before the payment date preceding that payment date to, but
excluding, the date which is 6 business days before that 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
January 9, 2004;
o last: period from and including the date which is 6 business days before
the payment date immediately prior to the final payment date to and
excluding the day which is 6 business days before that final payment date.
INTEREST PERIOD................................ with respect to a note, each period from and including a payment date to and
excluding the next payment date. However, the first and last Interest Periods
for each note are as follows:
o first: period from and including the closing date to and excluding the
first payment date.
o last: period from and including the 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.
DETERMINATION DATE............................. with respect to a payment date, the date which is 4 business days before that
payment date or, if that date is not a business day, then the next business day
unless that day falls in the next calendar month, in which case the
Determination Date will be the preceding business day.
PAYMENT DATE................................... the 20th day or, if the 20th day is not a business day, then the next business
day of each January, April, July and October unless that day falls in the next
calendar month, in which case the payment
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date will be the preceding business day. The first payment date will be in
January 2004.
EXAMPLE CALENDAR
The following example calendar for a quarter assumes that all relevant
days are business days.
COLLECTION PERIOD.............................. January 14 to April 13
INTEREST PERIOD................................ January 20 to April 19
DETERMINATION DATE............................. April 16
PAYMENT DATE................................... April 20
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 swaps 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 outstanding Principal Amount
of any Class A1 notes, 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 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 payment date with Mortgage
70
Principal Repayments to the extent they are available as described below under
"-- Additional Income Payments" and "-- Principal Distributions".
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 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 4 business days before that
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
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 the
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; and
o any fees payable to the note trustee for the Collection
Period; and
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 any fees payable to the note registrar 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 note registrar, 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 note registrar, the trust manager and the
servicer -- which the trust manager or the issuer trustee
reasonably anticipates will be incurred prior to the next payment
date; and
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 note registrar, the trust
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manager and the servicer -- not covered by the two previous bullet
points above which have already been incurred prior to the 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
any fixed-floating rate swaps other than any break costs in
respect of the termination of a fixed floating rate swap;
o any interest on any Class A1 notes for the Interest Period ending
on that payment date to the Class A1 noteholders;
o (1) the Class A2 A$ Interest Amount for that payment date to the
currency swap provider and the reciprocal payment by the currency
swap provider is thereafter to be applied towards payment of
interest on the Class A2 notes 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 payment date in order to
enable the issuer trustee to meet its obligations to pay interest
on the Class A2 notes 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 that payment date;
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; and
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 payment date to the
currency swap provider and the reciprocal payment by the currency
swap provider is thereafter to be applied towards payment of
interest on the Class B1 notes 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 payment date in order to
enable the issuer trustee to meet its obligations to pay interest
on the Class B1 notes 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 that payment date;
o any interest on the Class B2 notes for the Interest Period ending
on that payment date, including any past due interest, 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 Class B1 currency swap where the
currency swap provider is the defaulting party, as such term is
defined in the Class B1 currency swap.
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The issuer trustee shall only make a payment described in any of the
preceding bullet points in this section to the extent that any Available Income
remains from which to make the payment after amounts with priority to that
payment have been fully paid.
ADDITIONAL INCOME PAYMENTS
On each 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 until the Aggregate Principal Loss
Amount is reduced to zero.
o third, to reduce any Carryover Charge-Offs that have not been
reduced on prior payment dates until the Carryover Charge-Offs are
reduced to zero.
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
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 seller; and
o sixth, the balance, if any, pro rata 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 payment date under the second and
third bullet points above is called the RECOVERY AMOUNT for that 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 any 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 any 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.
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Up to, and including, the Step-Up Margin Date, the interest rate for
the Class B2 notes for any 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 any 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 STEP-UP MARGIN DATE means the payment date falling in October 2008.
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 payment date, interest on the notes will be
calculated as the product of:
o the outstanding Principal Amount of such class as of the first day
of the applicable Interest Period, after giving effect to any
payments of principal made or to be made with respect to such
class on such day; and
o the interest rate for such class of notes; and
o a fraction, the numerator of which is the actual number of days in
the applicable Interest Period and the denominator of which is 360
days for the 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 B2 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 for LIBOR.
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;
74
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 balance of the Prefunding Account on the first payment date
after the closing date which is to be treated as a Mortgage
Principal Repayment received by the issuer trustee during that
Collection Period;
o any other amount which, under the first bullet point under the
heading "-- Additional Income Payments", is to be treated as a
Mortgage Principal Repayment 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 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 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 payment date, any Liquid
Authorized Investments and any Recovery Amounts for the corresponding 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, 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:
o if the Threshold Requirements have been met on the payment
date, pro rata:
o to pay to (1) prior to the termination of the Class A2
currency swap, the currency swap provider the Class A2 A$
Equivalent of the Principal Amount of the Class A2 notes
and the reciprocal payment by the currency swap provider
is thereafter to be applied towards payment of the
Principal Amount of the Class A2 notes on that payment
date or (2) if the Class A2 currency swap has been
terminated, the note trustee for purchase of U.S. dollars
at the spot exchange rate to be applied in repaying
principal on the Class A2 notes on that payment date, in
each case until such time as all of the Class A2 notes
have been redeemed in full;
o to pay to (1) prior to the termination of the Class B1
currency swap, the currency swap provider the Class B1 A$
Equivalent of the Principal Amount of the Class B1 notes
and the reciprocal payment by the currency swap
75
provider is thereafter to be applied towards payment of
the Principal Amount of the Class B1 notes on that
payment date or (2) if the Class B1 currency swap has
been terminated, the note trustee for purchase of U.S.
dollars at the spot exchange rate to be applied in
repaying principal on the Class B1 notes on that payment
date, in each case until such time as all of the Class B1
notes have been redeemed in full; and
o to pay to the Class B2 noteholders in payment of the
Principal Amount of the Class B2 notes until such time as
all of the Class B2 notes have been redeemed in full,
provided that, each such amount in the preceding three bullet points shall
only be distributed to the extent that such distribution will not result in
a breach of the Threshold Requirements; or
o if the Threshold Requirements have not been met on the payment
date, in the following order of priority:
o first to pay to (1) prior to the termination of the Class A2
currency swap, the currency swap provider the Class A2 A$
Equivalent of the Principal Amount of the Class A2 notes and
the reciprocal payment by the currency swap provider is
thereafter to be applied towards payment of the Principal
Amount of the Class A2 notes on that payment date or (2) if
the Class A2 currency swap has been terminated, the note
trustee for purchase of U.S. dollars at the spot exchange
rate to be applied in repaying principal on the Class A2
notes on that payment date, in each case until such time as
all Class A2 notes have been redeemed in full; and
o second, pro rata:
o to pay to (1) prior to the termination of the Class B1
currency swap, the currency swap provider the Class B1 A$
Equivalent of the Principal Amount of the Class B1 notes
and the reciprocal payment by the currency swap provider
is thereafter to be applied towards payment of the
Principal Amount of the Class B1 notes or (2) if the
Class B1 currency swap has been terminated, the note
trustee for purchase of U.S. dollars at the exchange rate
to be applied in repaying principal on the Class B1 notes
on that payment date, in each case until such time as all
Class B1 notes have been redeemed in full; and
o to pay to the 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; and
o fifth, the balance as a distribution to the holder of the residual
capital unit as to A$10, and the remaining balance pro rata to each
holder of a residual income unit.
The issuer trustee, pursuant to the directions provided by the trust
manager, will only make a payment described in any of the preceding bullet
points above in this section to the extent that any Mortgage Principal
Repayments and Recovery Amounts remain from which to make the payment after
amounts with priority to that payment have been fully paid. The issuer trustee
will only use Liquid Authorized Investments in the third, fourth and fifth
bullet points
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above to the extent that the application of Liquid Authorized
Investments will not reduce the value of Liquid Authorized Investments to less
than the Prescribed Minimum Level.
The THRESHOLD REQUIREMENTS will be met if each of the following
conditions are satisfied:
o there are no Carryover Charge-Offs;
o no more than 5% of the housing loans (by unpaid principal balance)
are in arrears by an amount equal to two or more monthly payments
at the time;
o an amount equal to the aggregate of:
1. the Class B1 A$ Equivalent of the Principal Amount of all
Class B1 notes outstanding at the time; plus
2. the Principal Amount of all Class B2 notes outstanding at the
time;
is not less than 0.25% of the amount equal to the aggregate of:
1. the Class A2 A$ Equivalent of the Initial Principal Amount of
all Class A2 notes; plus
2. the Class B1 A$ Equivalent of the Initial Principal Amount of
all Class B1 notes; plus
3. the Initial Principal Amount of all Class B2 notes; and
o an amount equal to the aggregate of:
1. the Class B1 A$ Equivalent of the Principal Amount of all
Class B1 notes outstanding at the time; plus
2. the Principal Amount of all Class B2 notes outstanding at the
time;
is not less than 9.1% of the amount equal to the aggregate of:
1. the Class A2 A$ Equivalent of the Principal Amount of all
Class A2 notes at the time; plus
2. the Class B1 A$ Equivalent of the Principal Amount of all
Class B1 notes at the time; plus
3. the Principal Amount of all Class B2 notes at the time.
LIQUIDITY PURPOSES include:
o replenishing Liquid Authorized Investments to maintain the
Prescribed Minimum Level. See "--Application of Mortgage Principal
Repayments and Liquid Authorized Investments to Available Income";
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
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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 payment date, the Aggregate Principal Loss Amount for the
related Collection Period exceeds the amount allocated or available for
allocation on that 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 payment date. The trust manager will notify the issuer trustee and the
note trustee of the amount of any Charge-Offs for any payment date. The total of
the Charge-Offs from prior payment dates that have not been reduced from Income
as described above under "-- Additional Income Payments" are called CARRYOVER
CHARGE-OFFS.
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 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 relevant 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 relevant 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 payment date pro rata between
the relevant notes of a class 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; and
o principal on the Class A2 notes and the Class B1 notes, until
their outstanding principal amount 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 US$ noteholders specifying a 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 US$ 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
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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.
FIXED-FLOATING RATE SWAPS
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, each time a
fixed-rate housing loan is added to the housing loan pool or if a borrower
converts a floating rate loan to a fixed rate loan, to hedge the basis risk
between the interest rate on the fixed rate housing loans and the floating rate
obligations of the trust, including the interest due on the notes. 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 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 payment date an amount calculated by reference to the Bank Bill
Rate.
The terms of each 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 long term credit rating of at least
A2 and a short term credit rating of P-1 by Moody's; or
o if the fixed-floating rate swaps are 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
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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
a 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 a 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 any fixed-floating rate swaps will be denominated in Australian dollars.
The payments to the issuer trustee under any fixed-floating rate swaps 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 rate and currency exposure in relation to
the Class B1 notes. These currency swaps are called the US$ CURRENCY SWAPS and
will be governed by the laws of England and Wales.
The US$ currency swaps will 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.
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Under the Class A2 currency swap and the Class B1 currency swap, the
issuer trustee will pay to the currency swap provider on each payment date an
amount in Australian dollars equal to the lesser of (1) its pro rata share of
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 Principal
Amount of the Class A2 notes, or (b) the Class B1 A$ Equivalent of the Principal
Amount of the Class B1 notes, as the case may be. The currency swap provider
will pay directly to the US$ account of the principal paying agent on the
related 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$1.00. Both exchange rates will be fixed for the term of the US$
currency swaps.
In addition, under the Class A2 currency swap and the Class B1 currency
swap on each 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 payment date. The currency swap provider will pay
directly to the US$ account of the principal paying agent on the related 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 US$ currency swap. However, the issuer trustee will not be required to pay
grossed-up amounts to the currency swap provider under a US$ currency swap.
If on any 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
payment to be made by the currency swap provider with respect to such Australian
dollar floating rate 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.
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
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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; 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. 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
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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 a short term credit
rating of A-1+ by S&P and a long term credit rating of at least A2 and a short
term credit rating of at least P-1 by Moody's the currency swap provider must
within:
o 30 business days of a downgrade of the currency swap provider's
short term credit rating by S&P to not lower than A-1 or the
downgrade of its long term credit rating by Moody's to not lower
than A3; or
o 5 business days of any other such withdrawal or downgrade:
or, in either case, such greater period as is agreed to in writing by
the relevant rating agency, at the currency swap provider's cost:
o deposit and maintain in the relevant swap collateral account,
which will be a US$ account with an Approved Bank in the name of
the issuer trustee, an amount of funds which each rating agency
has confirmed will not result in a withdrawal or downgrade of the
then-current credit ratings assigned by it to the notes;
o procure a novation of the rights and obligations of the currency
swap provider under the currency swaps to one or more replacement
currency swap providers each with a credit rating not less than
A-1+ (short term) from S&P and A2 (long term) and P-1 (short term)
from Moody's with respect to the Class A2 currency swap and or a
credit rating not less than A-1+ (short-term) from S&P 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.
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
applicable swap collateral account pursuant to such 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 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
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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 a 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 Westpac Banking Corporation
(WESTPAC).
Westpac is a company registered in New South Wales under the
Corporations Act 2001 and has long term senior unsecured debt ratings of AA- and
Aa3 by S&P and Moody's respectively, and short term debt ratings of A-1+ and P-1
by S&P and Moody's respectively.
The annual report on Form 20-F for the year ended 2002 of Westpac is
on file with the Securities and Exchange Commission. For further information,
refer to the copy of the 20-F (referred to in the previous sentence) filed with
the Securities and Exchange Commission.
SWAP COLLATERAL ACCOUNT
If a swap provider provides cash collateral to the issuer trustee:
o the trust manager must direct the issuer trustee, and the issuer
trustee must, as soon as practicable, establish and maintain in
the name of the issuer trustee a swap collateral account with an
Approved Bank such that the deposit does not cause a downgrade or
withdrawal of the rating of any notes; and
o the swap provider must deposit the cash collateral in the swap
collateral account.
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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, or
o any amount for or on account of any present or future taxes,
duties, assessments or governmental charges of whatever nature
imposed, levied, collected, withheld or assessed by any
government agency, or
o a government agency requires the deduction or withholding from
payments by borrowers under the housing loans of any amount for or
on account of any taxes, duties, assessments or governmental
charges of whatever nature imposed, levied, collected, withheld or
assessed by that government agency,
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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 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 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 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 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
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, the
seller has a right of first refusal to acquire the housing loans. Any proceeds
from the enforcement of the security will be applied in accordance with the
order of priority of payments as set out in the security trust deed. See
"Description of the Transaction Documents -- The Security Trust Deed".
OPTIONAL REDEMPTION OF THE NOTES
ON STEP-UP MARGIN DATE
At the trust manager's direction, to be given not later than 4 business
days before the relevant 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 payment date falling on or after the Step-Up Margin Date,
being the October 2008 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
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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 payment date provided that:
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.
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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 payment date falling in January 2036.
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 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;
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 the 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
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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.
SELLER'S 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 the 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
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", "-- Additional Income Payments" and "-- Principal
Distributions", and in accordance with any directions given to it by the trust
manager. If all of the notes have been fully redeemed and the trust's other
creditors have been paid in full, the issuer trustee shall distribute the assets
of the trust to the residual beneficiary.
PRESCRIPTION
A US$ 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 US$ note becomes void in its entirety, no claim
may be made in respect of it.
REPORTS TO NOTEHOLDERS
On each payment date, the trust manager will, in respect of the
Collection Period ending before that 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 payment date occurring during that Collection
Period;
o the aggregate amount of interest payable on each class of notes
on the corresponding payment date, if any;
o the aggregate of all principal payments to be made in respect of
each class of notes on the corresponding payment date, if any;
o the Income for the Collection Period;
o the Mortgage Principal Repayments for the Collection Period;
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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 each class of notes for the Interest Period
ending on the day before the next payment date;
o the scheduled and unscheduled payments of principal on the housing
loans during the Collection Period;
o the Aggregate Principal Loss Amounts, if any, for the Collection
Period;
o the aggregate of the outstanding balances of the housing loans as
at the last day of the Collection Period;
o the Charge-Off and Carryover Charge-Offs, if any, for the
corresponding payment date;
o the Recovery Amount for the corresponding payment date, if any;
and
o delinquency and loss statistics with respect to the housing loans
during the Collection Period.
Unless and until definitive US$ 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 US$ 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, and then, only if the note trustee is indemnified to its
satisfaction in accordance with the note trust deed.
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DESCRIPTION OF THE TRANSACTION DOCUMENTS
The following summary, together with the information above under the
heading "Description of the 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 and the 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 and
the 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 backup servicer agreement is 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;
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
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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.
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
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o to the best of the knowledge of the person signing the
certificate, based on the review referred to in the above bullet
point, the issuer trustee has complied with all conditions and
covenants under the transaction documents, 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, 2004, 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, the security trustee and the trust manager are
collectively entitled to a fee for each Collection Period equal to 0.1% 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 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 wilful default of the issuer trustee or security trustee, as
applicable.
REMOVAL OF THE ISSUER TRUSTEE
The issuer trustee is required to retire as trustee after a direction
from the trust manager in writing following an Issuer Trustee's Default.
If the issuer trustee does not retire within 30 days of being directed
by the trust manager to do so, the trust manager shall have the right to remove
the issuer trustee from office as trustee of the Interstar Millennium Trusts.
On the retirement or removal of the issuer trustee the trust manager,
subject to giving prior notice to each rating agency shall be entitled to
appoint in writing some other statutory trustee to be the issuer trustee
provided that appointment will not in the reasonable opinion of the trust
manager materially prejudice the interests of any noteholders. Until the
appointment is completed the trust manager shall act as issuer trustee and will
be entitled to the trustee's fee for the period it so acts as issuer trustee.
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.
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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, liquidator, administrator or similar person to the issuer trustee --
except in relation to the assets of the trust -- 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.
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
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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.
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, see
"The Issuer Trustee -- Issuer Trustee and Security Trustee Fees and Expenses" --
on the first day of each Collection Period payable in arrears on the next
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.
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The trust manager may resign on giving to the issuer trustee, with a
copy to each rating agency, not less than 90 days, or another period as the
trust manager and the issuer trustee may agree, notice in writing of its
intention to do so.
On retirement or removal of the trust manager, the issuer trustee may
appoint another trust manager, or may act as trust manager, on such terms as the
issuer trustee sees fit, provided the appointment will not materially prejudice
the interests of noteholders. Until a replacement trust manager is appointed, or
the issuer trustee agrees to act as trust manager, the trust manager must
continue as trust manager. If a replacement trust manager is not appointed
within 90 days of the issuer trustee electing to appoint a new trust manager,
the issuer trustee will be the new trust manager.
LIMITATION OF TRUST MANAGER'S LIABILITY
The principal limitations on the trust manager's liability are set out
in full in the master trust deed. These include the following limitations:
o the trust manager will be indemnified out of the trust in respect
of any liability, cost or expense properly incurred by it in its
capacity as trust manager of the trust; and
o subject to the master trust deed, the trust manager is not
responsible for any act, omission, misconduct, mistake, oversight,
error of judgment, forgetfulness or want of prudence on the part
of the issuer trustee or any agent appointed by the issuer trustee
or on whom the trust manager is entitled to rely under the master
trust deed, other than a related company, attorney, banker,
receiver, barrister, solicitor, agent or other person acting as
agent or adviser to the trust manager, except to the extent of
losses, costs, claims or damages caused or contributed to by the
breach of its obligations under any transaction documents, 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 or of their powers or in respect of any matter or thing done or
omitted in any way relating to it, 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$50,000,000, as set forth in its most recent published annual report of
condition, and subject to supervision or examination by federal, state or
District of Columbia authority. The note trustee may also, if permitted by the
SEC, be organized under the laws of a jurisdiction other than the United States,
provided that it is authorized under such laws to exercise corporate trust
powers and is subject to examination by authority of such
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jurisdictions substantially equivalent to the supervision or examination
applicable to a trustee in the United States.
The note trustee may resign after giving three months' written notice
to the issuer trustee, the trust manager, the security trustee and each rating
agency. The issuer trustee may also remove the note trustee in the following
circumstances:
o if the note trustee becomes insolvent;
o if the note trustee ceases its business;
o if the note trustee fails to comply with any of its obligations
under any transaction document and the issuer trustee determines
that this failure has had, or if continued, will have, a Material
Adverse Effect, and if capable of remedy, the note trustee does
not remedy this failure within 14 days after the earlier of the
following:
o the note trustee becoming aware of this failure; and
o receipt by the note trustee of written notice with respect to
this failure from either the issuer trustee or the trust
manager; or
o if the note trustee fails to satisfy any obligation imposed on it
under the United States Trust Indenture Act of 1939 with respect
to the trust or the note trust deed.
Holders of 75% of the aggregate outstanding Principal Amount of the US$
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.
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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 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, 9 Castlereagh 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 seller 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.
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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;
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;
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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 for so long as any Secured Monies are owed to the Class A
noteholders, a fixed-floating rate swap or the Class A2 currency
swap is terminated and a replacement fixed-floating rate swap or
Class A2 currency swap, as the case may be, on terms that will not
lead to a withdrawal or downgrade of the rating of any notes, is
not put in place;
o for so long as no Secured Monies are owed to the Class A
noteholders, a fixed-floating rate swap or the Class B1 currency
swap is terminated and a replacement fixed-floating rate swap or
Class B1 currency swap, as the case may be, on terms that will not
lead to a withdrawal or downgrade of the rating assigned to any
notes, is not put in place;
o all or any part of any transaction document, other than a
fixed-floating rate swap or a currency swap, is terminated or is
or becomes void, illegal, invalid, unenforceable or of limited
force and effect or a party becomes entitled to terminate, rescind
or avoid all or part of any transaction document, other than or a
fixed-floating rate swap or a currency swap; or
o without the prior consent of the security trustee, that consent
being subject in accordance with the terms of the security trust
deed to the prior written consent of the Noteholder Mortgagees:
o the trust is wound up, or the issuer trustee is required to
wind up the trust under the master trust deed or applicable
law, or the winding up of the trust commences;
o the trust is held or is conceded by the issuer trustee not to
have been constituted or to have been imperfectly constituted;
or
o unless another trustee is appointed to the trust under the
transaction documents, the issuer trustee ceases to be
authorized under the trust to hold the property of the trust
in its name and to perform its obligations under the
transaction documents, 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 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.
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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$10,000 or its equivalent,
but not part thereof, of the Secured Monies that he holds or in respect of which
he is a representative.
A resolution of all the Voting Mortgagees, including an Extraordinary
Resolution, may be passed, without any meeting or previous notice being
required, by an instrument or notes in writing which have been signed by all of
the Voting Mortgagees.
ENFORCEMENT OF THE CHARGE
At any time after an event of default occurs, a resolution passed at a
duly convened meeting by a majority consisting of not less than 75% of the votes
capable of being cast by Voting Mortgagees present in person or by proxy or a
written resolution signed by all of the Voting Mortgagees may direct the
security trustee to do any or all of the following:
o declare the charge to be enforceable;
o declare all Secured Monies immediately due and payable;
o convert the floating charge to a fixed charge over any or all of
the trust assets; or
o appoint a receiver over the trust assets or itself exercise the
powers that a receiver would otherwise have under the security
trust deed.
If the Noteholder Mortgagees are the only Voting Mortgagees, they may
direct the security trustee to do any act which the security trustee is required
to do, or may only do, at the direction of an Extraordinary Resolution of Voting
Mortgagees, including enforcing the charge.
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THE NOTE TRUSTEE AS VOTING MORTGAGEE
If an event of default under the security trust deed occurs and is
continuing, the issuer trustee and the trust manager will promptly notify the
note trustee of such an occurrence and the note trustee shall deliver to each
US$ 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 relevant class of 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 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, 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 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.
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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;
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, other than those payable under the fourth bullet point,
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, the calculation agent or the
note registrar;
o any fees and expenses incurred in relation to the operation
and administration of the trust, including the issuer
trustee's fees and expenses; and
o the receiver's remuneration;
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o fifth, to pay pro rata the unpaid Accrued Interest Adjustment due
to the 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
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.
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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;
or
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:
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o borrowers in relation to the trust; and
o borrowers under other Interstar mortgage backed securities
programs which are funded by various warehouse funding trusts,
other Interstar Millennium Trusts and other trusts which issue
mortgage backed securities. Perpetual Trustees Victoria Limited is
the trustee of each of these other trusts.
Under the terms of the NBFI Agreement, the servicer is responsible for
the day to day verification and processing of checks and direct entry paperless
facilities. In providing these facilities to borrowers, there is a possibility
that the servicer may:
o process and authorize the issuer trustee to pay forged or
fraudulently drawn checks or entries;
o fail to comply with stop payment notices made by borrowers; or
o breach other covenants, representations and warranties or other
provisions of the NBFI Agreement.
The NBFI Agreement also requires the issuer trustee to place 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
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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;
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 in the first and second
bullet points 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 rank
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;
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o to give notice in writing to the issuer trustee and each rating
agency if it becomes aware of the occurrence of any Servicer
Transfer Event;
o to maintain in effect all qualifications, consents, licenses,
permits, approvals, exemptions, filings and registrations as may
be required under any applicable law in order properly to service
the housing loans and mortgages and to perform or comply with its
obligations under the investment management agreement;
o to notify the issuer trustee and the trust manager of any event
which it reasonably believes is likely to have a Material Adverse
Effect promptly after becoming aware of such event; and to notify
the trust manager of anything else which the trust manager
reasonably requires regarding any proposed modification to any
housing loan or related mortgage; and
o to provide information reasonably requested by the issuer trustee
or the trust manager, with respect to all matters relating to the
trust and the assets of the trust that the issuer trustee or the
trust manager believes reasonably necessary for it to perform its
obligations under the transaction documents, 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 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;
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;
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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; or
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.
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.
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THE BACKUP SERVICER AGREEMENT
The issuer trustee, the backup servicer and the servicer have entered
into the backup servicer agreement. Under the 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 will request the backup
servicer to become the servicer of the trust. The backup servicer is obliged to
become servicer at the request of the issuer trustee.
The backup servicer will act as servicer of the trust from the date of
its appointment until such time as the backup servicer is removed or retires in
accordance with the backup servicer agreement. The issuer trustee cannot appoint
the 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 backup servicer has been appointed, it will be bound by and
must observe the obligations and shall be entitled to exercise all the rights
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 backup servicer as servicer,
Interstar Securities (Australia) Pty Limited will immediately provide to the
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 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 backup servicer to fulfill its duties, obligations
and discretions as servicer. The issuer trustee may remove the backup servicer
as servicer after providing the backup servicer with written notice and in
accordance with the provisions of the investment management agreement.
The backup servicer agreement will be governed by the laws of the State
of Victoria.
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THE SERVICER
SERVICING OF HOUSING LOANS
Under the investment management agreement, Interstar Securities
(Australia) Pty Limited has been appointed as the initial servicer of the
housing loans. The day to day servicing of the housing loans will be performed
by the servicer at its head office in Melbourne. Servicing procedures include
managing customer inquiries, monitoring compliance with the loan features and
rights applicable to these loans, and the arrears management of delinquent
loans. See "Description of the Transaction Documents -- The Investment
Management Agreement".
COLLECTION AND ENFORCEMENT PROCEDURES
Pursuant to the terms of the housing loans, borrowers must make the
minimum repayment due under the terms and conditions of the housing loans, on or
before each monthly installment due date. Interstar Securities (Australia) Pty
Limited gives credit to repayments to an individual housing loan on the date of
its receipt. Interest is accrued daily on the balance outstanding after close of
business and charged monthly to each relevant loan account.
When a housing loan is 1 day delinquent, it is identified in the
mortgage service system. At the close of business on the last business day of
the month each delinquent account is transferred to the collection system. The
collection system identifies all accounts which are overdue and provides
detailed lists of those loans for action and follow-up.
The collection system allocates overdue loans to designated collection
officers at close of business on the third business day of each month.
Actions taken by the servicer in relation to delinquent accounts will
vary depending on the following elements and, if applicable, with the input of
the mortgage insurer:
o arrears history;
o loan size;
o equity in the property-- LVR; and
o arrangements made with the borrower to clear arrears and maintain
future minimum installments while arrears exist.
If satisfactory arrangements cannot be made to rectify a delinquent
housing loan, the servicer will instruct a panel solicitor to issue legal
notices and institute recovery action by enforcing the mortgage security.
Collection officers, under legal assistance, manage this process and pursue many
sources of recovery including the following:
o guarantees;
o government assistance schemes;
o mortgagee sale; and
o claims on mortgage insurance.
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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.
The arrears and security enforcement procedures may change over time as
a result of business changes, or legislative and regulatory changes.
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SERVICER DELINQUENCY EXPERIENCE
The table below summarizes the delinquency and foreclosure experience
of housing loans serviced by Interstar Securities (Australia) Pty Limited.
INTERSTAR MORTGAGE BACKED PROGRAM -- TOTAL PORTFOLIO HISTORICAL DELINQUENCIES
SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30,
PORTFOLIO AT: 1998 1999 1999 2000 2000
- --------------------------- ------------------ ----------------- ----------------- ----------------- ------------------
Outstanding Balance........ $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 9,440 11,328 14,498 18,579 23,091
Percentage of Delinquent Loans*
31 - 60 Days............... 0.40% 0.55% 0.54% 0.43% 0.35%
60 - 90 Days............... 0.23% 0.38% 0.31% 0.24% 0.16%
91 Days Plus............... 0.17% 0.18% 0.15% 0.13% 0.10%
Total Delinquencies over
30 Days................. 0.80% 1.11% 1.00% 0.80% 0.61%
MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31,
PORTFOLIO AT: 2001 2001 2002 2002 2003
- --------------------------- ----------------- ------------------ ----------------- ------------------ -----------------
Outstanding Balance........ $4,020,835,770.89 $4,820,490,560.20 $5,864,319,193.21 $7,436,170,410.31 $8,997,021,037.72
Number of Loans 27,406 32,114 38,113 46,825 56,322
Percentage of Delinquent
31 - 60 Days............... 0.33% 0.28% 0.40% 0.58% 0.40%
60 - 90 Days............... 0.14% 0.12% 0.19% 0.18% 0.17%
91 Days Plus............... 0.06% 0.06% 0.10% 0.12% 0.15%
Total Delinquencies over
30 Days................. 0.53% 0.46% 0.70% 0.89% 0.71%
SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31,
SIX MONTH PERIOD ENDING: 1998 1999 1999 2000
- -------------------------------------------------- ------------------ ----------------- ----------------- -----------------
Loan Losses as a % of Total Outstanding Balance**... 0.00% 0.00% 0.00% 0.00%
SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31,
SIX MONTH PERIOD ENDING: 2000 2001 2001 2002
- -------------------------------------------------- ------------------ ----------------- ------------------ -----------------
Loan Losses as a % of Total Outstanding Balance**... 0.00% 0.00% 0.00% 0.00%
SEPTEMBER 30, MARCH 31,
SIX MONTH PERIOD ENDING: 2002 2003
- -------------------------------------------------- ------------------ -----------------
Loan Losses as a % of Total Outstanding Balance**... 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.
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PREPAYMENT AND YIELD CONSIDERATIONS
The following information is given solely to illustrate the effect of
prepayments of the housing loans on the weighted average life of the 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.
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
114
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 on the housing loans will tend to shorten the weighted
average lives of the US$ notes, while redraws will tend to extend the weighted
average lives 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 lives 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. Neither the seller 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.
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 October 14,
2003;
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o closing date for the notes is October 20, 2003;
o on the closing date the issuer trustee will purchase housing loans
with an aggregate principal balance of A$1,251,126,743;
o payments on the US$ notes are made on each payment date,
regardless of the day on which payment actually occurs, commencing
in January 20, 2004, 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
twenty-seventh 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 September 1, 2003;
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;
o all prepayments are received on the twentieth 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 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 Margin Date (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 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; and
o the exchange rate is US$0.6340=A$1.0000.
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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.
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PERCENTAGE OF INITIAL PRINCIPAL AMOUNT OUTSTANDING OF THE CLASS A2
NOTES AT THE FOLLOWING PERCENTAGES OF CONSTANT PREPAYMENT RATE
DATE 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%
- ---- ---- ---- ----- ----- ----- ----- -----
Closing Date................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
October 20, 2004............... 99.4% 94.0% 88.7% 83.4% 78.1% 72.8% 67.6%
October 20, 2005............... 98.7% 88.4% 78.6% 69.4% 61.4% 53.9% 47.0%
October 20, 2006............... 97.9% 83.0% 69.5% 58.5% 48.8% 40.2% 32.7%
October 20, 2007............... 97.2% 77.9% 62.0% 49.3% 38.7% 29.9% 22.7%
October 20, 2008............... 96.2% 72.9% 55.3% 41.6% 30.7% 22.2% 15.7%
October 20, 2009............... 94.4% 67.6% 48.9% 34.7% 24.1% 16.4% 10.8%
October 20, 2010............... 92.3% 63.0% 43.1% 28.9% 18.9% 12.0% 7.4%
October 20, 2011............... 90.2% 58.5% 38.0% 24.0% 14.8% 8.8% 5.1%
October 20, 2012............... 87.9% 54.3% 33.4% 19.9% 11.6% 6.5% 3.5%
October 20, 2013............... 85.5% 50.2% 29.3% 16.5% 9.0% 4.7% 2.3%
October 20, 2014............... 82.9% 46.4% 25.6% 13.6% 7.0% 3.4% 1.5%
October 20, 2015............... 80.1% 42.7% 22.3% 11.2% 5.4% 2.5% 0.9%
October 20, 2016............... 77.1% 39.2% 19.4% 9.2% 4.2% 1.7% 0.5%
October 20, 2017............... 73.9% 35.8% 16.8% 7.5% 3.2% 1.2% 0.3%
October 20, 2018............... 70.6% 32.6% 14.5% 6.1% 2.5% 0.8% 0.1%
October 20, 2019............... 67.1% 29.5% 12.4% 5.0% 1.8% 0.5% 0.0%
October 20, 2020............... 63.6% 26.6% 10.6% 4.0% 1.3% 0.3% 0.0%
October 20, 2021............... 59.8% 23.8% 9.0% 3.2% 0.9% 0.1% 0.0%
October 20, 2022............... 55.8% 21.1% 7.5% 2.5% 0.6% 0.0% 0.0%
October 20, 2023............... 51.5% 18.5% 6.3% 1.9% 0.4% 0.0% 0.0%
October 20, 2024............... 47.0% 16.0% 5.1% 1.4% 0.2% 0.0% 0.0%
October 20, 2025............... 42.1% 13.6% 4.1% 1.0% 0.1% 0.0% 0.0%
October 20, 2026............... 36.9% 11.3% 3.3% 0.7% 0.0% 0.0% 0.0%
October 20, 2027............... 31.3% 9.1% 2.5% 0.4% 0.0% 0.0% 0.0%
October 20, 2028............... 25.4% 7.0% 1.7% 0.2% 0.0% 0.0% 0.0%
October 20, 2029............... 19.1% 5.0% 1.1% 0.0% 0.0% 0.0% 0.0%
October 20, 2030............... 12.4% 3.1% 0.5% 0.0% 0.0% 0.0% 0.0%
October 20, 2031............... 5.8% 1.2% 0.1% 0.0% 0.0% 0.0% 0.0%
October 20, 2032............... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
October 20, 2033............... 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 Margin Date (Years) 4.92 4.33 3.82 3.38 3.00 2.66 2.36
To Maturity (Years)............ 19.05 11.55 7.71 5.56 4.24 3.38 2.78
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PERCENTAGE OF INITIAL PRINCIPAL AMOUNT OUTSTANDING OF THE CLASS B1
NOTES AT THE FOLLOWING PERCENTAGES OF CONSTANT PREPAYMENT RATE
DATE 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%
- ---- ---- ---- ----- ----- ----- ----- -----
Closing Date................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
October 20, 2004............... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 98.9%
October 20, 2005............... 100.0% 100.0% 100.0% 100.0% 89.9% 79.0% 68.8%
October 20, 2006............... 100.0% 100.0% 100.0% 85.6% 71.4% 58.8% 47.8%
October 20, 2007............... 100.0% 100.0% 90.8% 72.2% 56.7% 43.8% 33.2%
October 20, 2008............... 100.0% 100.0% 81.0% 60.9% 45.0% 32.6% 23.1%
October 20, 2009............... 100.0% 99.0% 71.6% 50.8% 35.3% 24.0% 15.8%
October 20, 2010............... 100.0% 92.2% 63.1% 42.3% 27.7% 17.6% 10.9%
October 20, 2011............... 100.0% 85.7% 55.6% 35.2% 21.7% 12.9% 7.4%
October 20, 2012............... 100.0% 79.5% 48.9% 29.2% 16.9% 9.5% 5.1%
October 20, 2013............... 100.0% 73.6% 42.8% 24.2% 13.2% 6.9% 3.9%
October 20, 2014............... 100.0% 67.9% 37.5% 20.0% 10.3% 5.0% 3.9%
October 20, 2015............... 100.0% 62.5% 32.7% 16.5% 7.9% 3.9% 3.9%
October 20, 2016............... 100.0% 57.4% 28.4% 13.5% 6.1% 3.9% 3.9%
October 20, 2017............... 100.0% 52.4% 24.6% 11.0% 4.7% 3.9% 3.9%
October 20, 2018............... 100.0% 47.7% 21.2% 9.0% 3.9% 3.9% 3.9%
October 20, 2019............... 98.2% 43.2% 18.2% 7.3% 3.9% 3.9% 3.6%
October 20, 2020............... 93.1% 38.9% 15.5% 5.9% 3.9% 3.9% 2.4%
October 20, 2021............... 87.6% 34.8% 13.1% 4.7% 3.9% 3.9% 1.6%
October 20, 2022............... 81.7% 30.8% 11.0% 3.9% 3.9% 3.8% 1.0%
October 20, 2023............... 75.4% 27.0% 9.2% 3.9% 3.9% 2.6% 0.7%
October 20, 2024............... 68.8% 23.4% 7.5% 3.9% 3.9% 1.8% 0.4%
October 20, 2025............... 61.6% 19.9% 6.1% 3.9% 3.9% 1.2% 0.3%
October 20, 2026............... 54.0% 16.6% 4.8% 3.9% 3.5% 0.8% 0.2%
October 20, 2027............... 45.9% 13.4% 3.9% 3.9% 2.4% 0.5% 0.1%
October 20, 2028............... 37.2% 10.3% 3.9% 3.9% 1.5% 0.3% 0.1%
October 20, 2029............... 28.0% 7.4% 3.9% 3.9% 0.9% 0.2% 0.0%
October 20, 2030............... 18.2% 4.6% 3.9% 2.5% 0.5% 0.1% 0.0%
October 20, 2031............... 8.5% 3.9% 3.9% 1.0% 0.2% 0.0% 0.0%
October 20, 2032............... 3.4% 0.8% 0.2% 0.0% 0.0% 0.0% 0.0%
October 20, 2033............... 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 Margin Date (Years) 5.00 5.00 4.84 4.43 3.99 3.57 3.18
To Maturity (Years)............ 23.23 15.56 10.66 7.85 6.11 4.91 4.05
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USE OF PROCEEDS
The proceeds from the issue of the US$ notes, after being exchanged
pursuant to the currency swaps, will amount to A$[_______]. These issue
proceeds, together with the proceeds of the issue of the other notes, will be
used by the issuer trustee, in most part, to acquire from the seller the
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 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.
120
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 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
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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:
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
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becomes the absolute owner of the property, a remedy that is,
because of procedural constraints, rarely used. If the mortgagee
forecloses on the property, it loses the right to sue the
borrower under the personal covenant to repay and can only look
to the value of the property for satisfaction of the debt.
o The mortgagee may appoint a receiver to deal with income from the
property or exercise other rights delegated to the receiver by the
mortgagee. A receiver is the agent of the mortgagor and so, unlike
when the mortgagee enters possession of property, in theory the
mortgagee is not liable for the receiver's acts or as occupier of
the property. In practice, however, the receiver will require
indemnities from the mortgagee that appoints it.
o The mortgagee may sell the property, subject to various duties to
ensure that the mortgagee exercises proper care in relation to the
sale. This power of sale is usually expressly contained in the
mortgage documents, and is also implied in registered mortgages
under the relevant Torrens title legislation. The Torrens title
legislation prescribes certain forms and periods of notice to be
given to the mortgagor prior to enforcement. A sale under a
mortgage may be by public auction or private treaty. Once
registered, the purchaser of property sold pursuant to a
mortgagee's power of sale becomes the absolute owner of the
property.
A mortgagee's ability to call in all amounts under a housing loan or
enforce a mortgage which is subject to the Consumer Credit Legislation is
limited by various demand and notice procedures which are required to be
followed. For example, as a general rule enforcement cannot occur unless the
relevant default is not remedied within 30 days after a default notice is given.
Borrowers may also be entitled to initiate negotiations with the mortgagee for a
postponement of enforcement proceedings.
PENALTIES AND PROHIBITED FEES
Australian courts will not enforce an obligation of a borrower to pay
default interest on delinquent payments if the court determines that the
relevant default interest rate is a penalty. Certain jurisdictions prescribe a
maximum recoverable interest rate, although in most jurisdictions there is no
specified threshold rate to determine what is a penalty. In those circumstances,
whether a rate is a penalty or not will be determined by reference to such
factors as the prevailing market interest rates. The Consumer Credit Legislation
does not impose a limit on the rate of default interest, but a rate which is too
high may entitle the borrower to have the loan agreement re-opened on the ground
that it is unjust. Under the Corporations Act 2001 of Australia, the liquidator
of a company may avoid a loan under which an extortionate interest rate is
levied.
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,
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such as mortgagees under real property mortgages, stand outside the bankruptcy.
That is, the property of the bankrupt which is available for distribution by the
trustee in bankruptcy does not include the secured property. The secured
creditor may, if it wishes, prove, or file a claim, in the bankruptcy proceeding
as an unsecured creditor in a number of circumstances, including if they have
realized the related mortgaged property and their debt has not been fully
repaid, in which case they can prove for the unpaid balance. Certain
dispositions of property by a bankrupt may be avoided by the trustee in
bankruptcy. These include where:
o the disposition was made to defraud creditors; or
o the disposition was made by an insolvent debtor within 6 months of
the petition for bankruptcy and that disposition gave a preference
to an existing creditor over at least one other creditor.
The insolvency of a company is governed by the Corporations Act 2001 of
Australia. Again, secured creditors generally stand outside the insolvency.
However, a liquidator may avoid a mortgage which is voidable under the
Corporations Act because it is an uncommercial transaction, or an unfair
preference to a creditor or a transaction for the purpose of defeating
creditors, and that transaction occurred:
o when the company was insolvent, or an act is done to give effect
to the transaction when the company is insolvent, or the company
becomes insolvent because of the transaction or the doing of an
act to give effect to the transaction; and
o within a prescribed period prior to the commencement of the
winding up of the company.
ENVIRONMENTAL
Real property which is mortgaged to a lender may be subject to
unforeseen environmental problems, including land contamination. Environmental
legislation which deals with liability for such problems exists at both State
and Federal levels, although the majority of relevant legislation is imposed by
the States. No Australian statute expressly imposes liability on "passive"
lenders or security holders for environmental matters, and some states expressly
exclude such liability. However, liability in respect of environmentally damaged
land, which liability may include the cost of rectifying the damage, may attach
to a person who is, for instance, an owner, occupier or person in control of the
relevant property. In some but not all States, lenders are expressly excluded
from the definitions of one or more of these categories.
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.
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INSOLVENCY CONSIDERATIONS
The current transaction is designed to mitigate insolvency risk. For
example, the assignment of the beneficial interest of the 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 the seller in the event of an
insolvency of the 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 notes in full, some or
all of the noteholders will incur a loss.
TAX TREATMENT OF INTEREST ON AUSTRALIAN HOUSING LOANS
Under Australian law, interest on loans used to purchase a person's
primary place of residence is not ordinarily deductible for taxation purposes.
Conversely, interest payments on loans and other non-capital expenditures
relating to non-owner occupied properties that generate taxable income are
generally allowable as tax deductions.
CONSUMER CREDIT LEGISLATION
The majority of the housing loans are regulated by the Consumer Credit
Legislation. Under the Consumer Credit Legislation a borrower has the right to
apply to a court to do the following, among other things:
o vary the terms of a housing loan on the grounds of hardship or
that it is an unjust contract;
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
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turn affect the timing or amount of interest or principal payments or repayments
to you under the notes.
At the time the issuer trustee acquires the beneficial interest in the
housing loans, the trust manager and the servicer represent and warrant that the
housing loans and related mortgages complied in all material respects with the
Consumer Credit Legislation at the applicable cut-off date. Under the investment
management agreement, the servicer has undertaken to comply with the Consumer
Credit Legislation in connection with servicing the housing loans and related
mortgages.
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UNITED STATES FEDERAL INCOME TAX MATTERS
OVERVIEW
The following is a summary of the material United States federal income
tax consequences of the purchase, ownership and disposition of the 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 LLP, 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 LLP 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 LLP 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.
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,
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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 LLP, the issuer trustee and the trust will not be subject to United
States federal income tax.
In the opinion of Mayer, Brown, Rowe & Maw LLP, 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.
Under Treasury regulations, called the "OID Regulations," relating to
original issue discount, 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 LLP 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 LLP 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$ 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
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the extent of capital gains and by an individual taxpayer only to the extent of
capital gains plus US$3,000 of other United States income.
MARKET DISCOUNT
In the opinion of Mayer, Brown, Rowe & Maw LLP, you will be considered
to have acquired a US$ 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
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.
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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 LLP, 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 LLP 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 of 30%, in effect for payments made during the taxable year 2003,
will be reduced to 29% for payments made during the taxable years 2004 and 2005,
and 28% for payments made during the taxable years 2006 through 2010. For
payments made after 2010, the backup withholding tax rate will be increased to
31%. Exempt investors, such as corporations, tax-exempt organizations, qualified
pension and profit sharing trusts, individual retirement accounts or
non-resident aliens who provide certification of their status as non-resident
are not subject to backup withholding. Information returns will be sent annually
to the Internal Revenue Service by the trust manager and to you stating the
amount of interest paid, original issue discount accrued, if any, and the amount
of tax withheld from payments on the 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.
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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
128A(1AB) of the Tax Act, is paid; and
o the notes, or a global bond or note or interests in such a global
bond or note, 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 offshore associate of the issuer trustee, within
the meaning of that term under "-- Offering Restrictions -- Australia", other
than in the capacity of a dealer, manager or underwriter in relation to a
placement of the notes or in the capacity of a clearing house, custodian, funds
manager or responsible entity of a registered scheme. However, the Australian
government enacted on April 2, 2003, Taxation Laws Amendment Act (No 1) of 2003,
which contains amendments, which are effective from August 29, 2001, to treat
interest payments to the following associates as being eligible for the
exemption if the issue of the notes otherwise satisfies the requirements of
section 128F:
o an Australian resident that does not acquire the note in carrying
on business at or through a permanent establishment in a country
outside Australia;
o an Australian resident that acquires the note in carrying on
business at or through a permanent establishment in a country
outside Australia if the interest is received in the capacity of a
clearing house, paying agent, custodian, funds manager or
responsible entity of a registered scheme;
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o a non-resident that acquires the note in carrying on business at
or through a permanent establishment in Australia; and
o a non-resident that acquires the note 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.
TAXATION OF FINANCIAL ARRANGEMENTS
The Australian Federal Government introduced into Parliament on May 29,
2003, The New Business (Taxation of Financial Arrangements) Bill (No. 1) 2003
(the BILL). The Bill includes proposed measures in relation to the treatment of
foreign currency gains and losses on transactions entered into on or after the
first income year commencing on or after July 1, 2003. In addition, the new
rules will also apply, at the option of the taxpayer, to foreign currency gains
and losses on transactions entered into prior to the first income year
commencing after July 1, 2003 but realized after that time.
The Bill also contains proposed measures in relation to the removal of
the taxing point on conversion or exchange of certain traditional securities.
These proposed measures apply to traditional securities issued after May 14,
2002.
The specific taxation implications of these proposed measures will vary
as between noteholders. Broadly, the taxation consequences will depend on
whether noteholders own the notes on revenue or capital account.
The proposed measurers should not impact non-resident noteholders who
do not have a permanent establishment in Australia.
Noteholders should seek their own advice in relation to the specific
taxation consequences of these proposed measures.
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.
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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.
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. However, the
Australian government enacted on April 2, 2003 Taxation Laws
Amendment Act (No. 1) 2003, which 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 applies
retrospectively from 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 based 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.
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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 and location 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 nor consideration for a supply by noteholders.
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 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 and any transactions that
they enter into associated with the notes.
FIXED-FLOATING RATE SWAPS 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.
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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:
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
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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.
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.
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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
Australia has introduced a tax consolidation regime that applies to
wholly-owned corporate groups from July 1, 2002. Entry into this system is
optional, however the choice by a head company to consolidate brings all of its
wholly-owned subsidiaries, which are companies, partnership or trusts, into the
regime. An entity is wholly-owned for these purposes if all of the membership
interests in it are held directly or indirectly by the head company.
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
legislation provides 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 a
contingent risk that the members of a consolidated group may be liable to
contribute to a consolidated group's income tax liabilities.
It is understood that the Challenger group of companies (the CHALLENGER
GROUP) will, or has, elected to consolidate its wholly-owned subsidiaries. The
trust is not a wholly-owned subsidiary of the Challenger Group. This conclusion
is premised on the fact that an entity outside of the Challenger Group holds the
residual capital unit in the trust. As a unitholder unrelated to any member of
the Challenger Group exists, the trust cannot be consolidated and thus is not
and cannot be jointly and severally liable for the Challenger Group's income tax
liabilities.
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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.
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.
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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, its
senior officials and their immediate families, individuals associated with the
regime of former President of Yugoslavia Slobodan Milosevic and certain
ministers and senior officials of the Government of Zimbabwe 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.
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended (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
139
regulation is applicable. An equity interest is defined under the regulation as
an interest in an entity other than an instrument which is treated as
indebtedness under applicable local law and which has no substantial equity
features. Although there can be no assurances in this regard, it appears, at the
time of their initial issuance that the notes should be treated as debt without
substantial equity features for purposes of the regulation and that the notes do
not constitute equity interests in the trust for purposes of the regulation. The
debt characterization of the notes could change after their initial issuance if
the trust incurs losses. 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, the backup servicer,
the trust manager, the note trustee, the seller, a swap provider, the
underwriters or the security trustee is or becomes a party in interest or a
disqualified person with respect to these Benefit Plans. In such case, certain
exemptions from the prohibited transaction rules could be applicable depending
on the type and circumstances of the plan fiduciary making the decision to
acquire a note. Included among these exemptions are:
o Prohibited Transaction Class Exemption 96-23, regarding
transactions effected by "in-house asset managers";
o Prohibited Transaction Class Exemption 95-60, regarding
transactions effected by "insurance company general accounts";
o Prohibited Transaction Class Exemption 91-38, regarding
investments by bank collective investment funds;
o Prohibited Transaction Class Exemption 90-1, regarding
investments by insurance company pooled separate accounts; and
o Prohibited Transaction Class Exemption 84-14, regarding
transactions effected by "qualified professional asset managers".
By your acquisition of a 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.
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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. Copies
of the registration statement, including any amendments or exhibits, may be
obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The SEC also maintains a World Wide
Web site which provides on-line access to reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC at the address "http://www.sec.gov".
RATINGS OF THE NOTES
The issuance of the Class A2 notes will be conditional 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 conditional on obtaining a rating of AA- by S&P and
Aa3 by Moody's.
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 A 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 AAA by S&P and Aaa
by Moody's. In the context of an asset securitisation, the foreign currency
rating of a country reflects, in general, a rating agency's view of the
likelihood that cash flow on the assets in such country's currency will be
permitted to be sent outside of that country. None of the rating agencies have
been involved in the preparation of this prospectus.
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PLAN OF DISTRIBUTION
UNDERWRITING
Under the terms and subject to the conditions contained in the
underwriting agreement among the underwriters, the issuer trustee, 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...................................................................... $
J.P. Morgan Securities Inc................................................................ $
Total..................................................................................... $
PRINCIPAL AMOUNT OF
CLASS B1 NOTES
UNDERWRITERS OF THE CLASS B1 NOTES (US$)
---------------------------------- -------------------
Barclays Capital Inc...................................................................... $
J.P. Morgan Securities Inc................................................................ $
Total..................................................................................... $
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$500,000.
The trust manager has agreed to indemnify the underwriters against
civil liabilities under the Securities Act, or contribute to payments which the
underwriters may be required to make in that respect.
The total underwriting discounts and commissions for the US$ notes will
be equal to US$[__________]. The underwriting discounts and commissions will be
paid separately by Interstar Securities (Australia) Pty Limited and not from the
proceeds of the issuance of the US$ notes.
142
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.
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, prior to the expiry
of six months from the closing date, 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 authorized under FISMA or otherwise any professional with experience
on matters relating to investments and qualifying 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 or to
any other person to whom an invitation or inducement to enter into investment
activity of this type may otherwise lawfully be communicated.
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
143
entitled to rely on, and must not act on, any information in this prospectus.
The communication 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
invite applications for the issue of or for offers to purchase nor
will it sell the US$ notes; and
o has not distributed and will not distribute any draft, preliminary
or definitive offering circular, or any advertisement or other
offering material,
in Australia, its territories or possessions unless:
o the amount payable for the 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 offshore associate of the
issuer trustee, other than in the capacity of a dealer, manager or
underwriter in relation to a placement of the US$ notes, or in the
capacity of a clearing house, custodian, funds manager or
responsible entity of a registered scheme.
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 underwriter knows, or has reasonable
grounds to suspect that, as a result of such sale, such US$ notes or any
interest in such US$ notes will be, or will later be acquired, directly or
indirectly, by an offshore associate of the issuer trustee other than in the
capacity of a dealer, manager or underwriter in relation to the placement of the
US$ notes or in the capacity of a clearing house, custodian, funds manager or
responsible entity of a registered scheme.
An OFFSHORE ASSOCIATE OF THE ISSUER TRUSTEE means an associate (within
the meaning of section 128F of the Tax Act) of the issuer trustee that is either
a non-resident of Australia that does not acquire the US$ notes in carrying on a
business at or through a permanent
144
establishment in Australia or, alternatively, a resident of Australia that
acquires the US$ notes in carrying on a business at or through a permanent
establishment outside Australia.
Each underwriter has agreed that it must offer the US$ notes for which
it subscribes 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 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; or
o by the underwriter offering those US$ notes as a result of the US$
notes 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 by the underwriter offering those US$ notes 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.
145
GENERAL INFORMATION
LISTING
An application will be 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 [_______], 2003.
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 [_______]
for the Class A2 notes and Common Code number [_______] and ISIN [_______] for
the Class B1 notes.
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 LLP, 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
Securitisation Management Pty Limited. KPMG will pass upon the Australian tax
matters with respect to the US$ notes for Interstar Securitisation Management
Pty Limited.
146
Orrick, Herrington & Sutcliffe, London, United Kingdom will act as United States
legal counsel to the underwriters.
147
GLOSSARY
ACCRUED INTEREST ADJUSTMENT.................... means, in relation to the seller, the amount equal to any interest and fees
accrued on the housing loans purchased from the 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;
148
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 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 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 59.
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 three-month bill or, in the case of the first Interest
Period, the linear interpolation of the average of the buying and selling rates
for two and a three-month bill, in each case 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
149
applicable on that date shall be deemed to be the Bank Bill Rate which is
applicable on the business day next succeeding that date. A certificate signed
by a financial advisor nominated by the trust manager or the trust manager
certifying as to the Bank Bill Rate on any date shall be final and conclusive
evidence thereof in the absence of manifest error.
BENEFIT PLAN................................... means an employee benefit plan as defined in Section 3(3) of ERISA that is
subject to Title I of ERISA, a plan described in Section 4975(e)(1) of 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 64.
CHARGE-OFF..................................... see page 64.
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 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
theStep-Up Margin Date;
o on the Class A2 A$ Equivalent of the Principal Amount of the Class A2
notes as at the first day of the Interest Period ending on that payment
date; and
150
o on the basis of the actual number of days in the relevant payment period
and a year of 365 days.
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 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 Principal Amount of the Class B1
notes as at the first day of the Interest Period ending on that payment
date; and
o on the basis of the actual number of days in the relevant payment period
and a year of 365 days, and shall include any interest due and unpaid from
a prior Payment Date.
CODE........................................... see page 106.
COLLECTION PERIOD.............................. see page 58.
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.
151
DETERMINATION DATE............................. see page 58.
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 59.
INCOME SHORTFALL............................... see page 59.
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 of its business or disposes of or
threatens to dispose of substantially all of its assets;
152
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 58.
ISDA........................................... means the International Swaps and Derivatives Association, Inc.
ISDA DEFINITIONS............................... means the 2000 ISDA definitions, as amended and updated as at the Note Issue
Date.
ISSUER TRUSTEE'S DEFAULT....................... means:
o an Insolvency Event has occurred and is continuing in relation to the
issuer trustee;
153
o any action is taken in relation to the issuer trustee which causes the
rating of any notes to be downgraded or withdrawn;
o the issuer trustee, or any employee or officer of the issuer trustee,
breaches any obligation or duty imposed on the issuer trustee under any
transaction document, 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 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
154
agent will request the principal London office of each of the Reference Banks to
provide a quotation of its rate. If at least two such quotations are provided by
Reference Banks to the calculation agent, the rate for that Interest Period will
be the arithmetic mean of the quotations. If fewer than two quotations are
provided by Reference Banks to the calculation agent following the calculation
agent's request, the rate for that Interest Period will be the arithmetic mean
of the rates quoted by four major banks in New York City, selected by the
calculation agent and the currency swap provider, at approximately 11.00 am, New
York City time, on that rate reset date for loans in 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
155
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:
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 64.
LOW DOC LOAN................................... see page 45.
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.
MORTGAGE PRINCIPAL REPAYMENTS.................. see page 62.
MORTGAGEES..................................... see page 82.
NOTEHOLDER MORTGAGEES.......................... means the Class A1 noteholders, the Class B2 noteholders and the note trustee, on
behalf of the Class A2 noteholders and the Class B1 noteholders.
PAYMENT DATE................................... see page 58.
PREFUNDING ACCOUNT............................. see page 30.
156
PRESCRIBED MINIMUM LEVEL....................... see page 59.
PRIMARY EXPENSES............................... see page 59.
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.
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.
RECOVERY AMOUNT................................ see page 61.
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 90.
STEP-UP MARGIN DATE............................ means the payment date falling in October 2008.
TAX ACT........................................ see page 110.
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
157
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 64.
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 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
158
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 84.
159
================================================================================
INTERSTAR MILLENNIUM SERIES 2003-5G TRUST
CLASS A2 MORTGAGE BACKED FLOATING RATE NOTES
CLASS B1 MORTGAGE BACKED FLOATING RATE NOTES
- --------------------------------------------------------------------------------
PROSPECTUS
- --------------------------------------------------------------------------------
UNDERWRITERS OF THE CLASS A2 NOTES AND THE CLASS B1 NOTES
BARCLAYS CAPITAL JPMORGAN
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 [__________], 2004, 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.......................................... $ 62,940.20
Printing and Engraving........................................ $71,300.00
Legal Fees and Expenses....................................... $500,000.00
Trustee Fees and Expenses..................................... $15,000.00
Rating Agency Fees............................................ $85,000.00
Accounting Fees & Expenses.................................... $50,000.00
Miscellaneous................................................. $75,000.00
--------------
Total......................................................... $859,240.20
==============
- ----------
* 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.*
II-1
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.
* Previously filed.
** To be filed by amendment.
ITEM 37. UNDERTAKINGS.
The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective.
For the purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration
II-2
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 Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-11 and has duly caused the
Pre-Effective Amendment No. 1 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Melbourne,
Australia, on the __th day of September, 2003.
Interstar Securitisation
Management Pty Limited
By: /s/ Paul Jorissen
----------------------------
Name: Paul A. Jorissen
Title: Attorney-in-fact, under a
Power of Attorney dated
September 5, 2003
II-4
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/ Paul Jorissen Director September 29, 2003
- --------------------------
* /s/ Paul Jorissen Director September 29, 2003
- --------------------------
* /s/ Paul Jorissen Principal Executive Officer September 29, 2003
- --------------------------
* /s/ Paul Jorissen Principal Financial Officer September 29, 2003
- --------------------------
* /s/ Paul Jorissen Principal Accounting Officer September 29, 2003
- --------------------------
* By: Paul A. Jorissen
Attorney-in-fact, under a
Power of Attorney dated
September 5, 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 Pre-Effective
Amendment No. 1 to Registration Statement and signs this Pre-Effective Amendment
No. 1 to 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
Commonwealth Bank of Australia
II-6
EXHIBITS INDEX
EXHIBIT SEQUENTIAL 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.
* Previously filed.
** To be filed by amendment.
II-7