The attached Prospectus dated October 23, 2003 (the "Prospectus")
relating to the US$675,000,000 Class A2 Mortgage Backed Floating Rate Notes and
US$41,000,000 Class B1 Mortgage Backed Floating Rate Notes (collectively, the
"Securities") issued by Interstar Millenium Series 2003-5G Trust (the "Issuer")
was originally filed on October 23, 2003 by Interstar Securitisation Management
Pty Limited (the "Registrant"), pursuant to Rule 424(b)(4) under the Securities
Act of 1933. It is being re-filed for the sole purpose of including an optional
"serial tag" in the header of the electronic submission to indicate that a
reporting entity separate from the Registrant issued the Securities. No
modifications or updates to the Prospectus have been made for purposes of this
filing. The Prospectus speaks only as of the date it was originally filed.
File Pursuant to Rule 424B(4)
Registration File No: 333-108537
INTERSTAR MILLENNIUM SERIES 2003-5G TRUST
US$675,000,000 CLASS A2 MORTGAGE BACKED FLOATING RATE NOTES
US$41,000,000 CLASS B1 MORTGAGE BACKED FLOATING RATE NOTES
[INTERSTAR LOGO OMITTED]
INTERSTAR SECURITISATION MANAGEMENT PTY LIMITED
(ABN 56 100 346 898)
TRUST MANAGER
PERPETUAL TRUSTEES VICTORIA LIMITED
(ABN 47 004 027 258)
ISSUER TRUSTEE
The Class A2 notes and the Class B1 notes, collectively the US$ 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 13.
INITIAL UNDERWRITING
PRINCIPAL INITIAL PRICE TO DISCOUNTS AND PROCEEDS TO
BALANCE INTEREST RATE PUBLIC COMMISSIONS* ISSUER TRUSTEE*
---------------- --------------- ------------------------- ----------------------- ------------------------
Class A2 notes US$675,000,000 LIBOR+ 0.25% US$675,000,000 or 100% US$945,000 or 0.14% US$675,000,000 or 100%
Class B1 notes US$41,000,000 LIBOR+ 0.75% US$41,000,000 or 100% US$57,400 or 0.14% US$41,000,000 or 100%
An application will be made to have the US$ 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 October 28, 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 October 23, 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 .................................................................. vii
Summary ................................................................................. 1
Parties to the Transaction ............................................................. 1
Structural Diagram ..................................................................... 2
Summary of the Notes ................................................................... 3
Structural Overview .................................................................... 4
Credit Enhancements .................................................................... 4
Liquidity Enhancement .................................................................. 5
Redraws ................................................................................ 5
Hedging Arrangements ................................................................... 6
Optional Redemption .................................................................... 6
Prefunding ............................................................................. 6
The Housing Loan Pool .................................................................. 7
Selected Housing Loan Pool Data as of Close of Business on September 1, 2003 ........... 7
Withholding Tax ........................................................................ 8
U.S. Tax Status ........................................................................ 8
Australian Tax Status .................................................................. 8
Legal Investment ....................................................................... 8
ERISA Considerations ................................................................... 8
Book-Entry Registration ................................................................ 8
Collections ............................................................................ 8
Interest on the Notes .................................................................. 9
Principal on the Notes ................................................................. 9
Allocation of Cash Flows ............................................................... 9
Distribution of Income On Each Payment Date ............................................. 10
Distribution of Mortgage Principal Repayments, Liquid Authorized Investments and
Recovery Amounts on Each Payment Date .................................................. 12
Risk Factors ............................................................................ 13
Capitalized Terms ....................................................................... 24
U.S. Dollar Presentation ................................................................ 24
The Issuer Trustee, the Trust Manager and the Servicer .................................. 25
The Issuer Trustee ..................................................................... 25
The Trust Manager ...................................................................... 25
The Servicer ........................................................................... 25
The Seller ............................................................................. 28
The Backup Servicer .................................................................... 28
Description of the Trust ................................................................ 29
Interstar Millennium Trusts Securitization Program ..................................... 29
Interstar Millennium Series 2003-5G Trust .............................................. 29
Description of the Assets of the Trust .................................................. 30
Assets Of The Trust .................................................................... 30
The Housing Loans ...................................................................... 30
Acquisition of Housing Loans after the Closing Date .................................... 30
Transfer and Assignment of the Housing Loans ........................................... 31
Representations, Warranties and Eligibility Criteria ................................... 31
Breach of Representations and Warranties ............................................... 35
i
PAGE
-----
Other Features of the Housing Loans ................................................. 35
Details of the Housing Loan Pool .................................................... 35
Housing Loan Information ............................................................. 36
Analysis Of The Housing Loan Pool .................................................... 36
Housing Loans By Occupancy ........................................................... 36
Housing Loans By LVR (Loan-To-Value Ratio) ........................................... 37
Housing Loans By Product Types ....................................................... 37
Housing Loans By Geographical Distribution ........................................... 38
Housing Loans By Loan Size ........................................................... 38
Housing Loans By Postcode Concentration -- Top 10 By Loan Amount ..................... 39
Housing Loans By Loan Seasoning ...................................................... 39
Housing Loans By Maturity ............................................................ 39
Housing Loans By Mortgage Insurer .................................................... 40
Housing Loans By Mortgage Insurer And LVR PMI Mortgage Insurance ..................... 40
Mortgage Loans By Mortgage Insurer And LVR PMI Indemnity ............................. 41
Mortgage Loans By Mortgage Insurer And LVR GE Capital Mortgage Insurance ............. 41
Housing Loans By Current Coupon Rates ................................................ 42
Housing Loans By Months Remaining To Maturity ........................................ 42
Housing Loans By Interest Only Period Remaining ...................................... 43
Housing Loans By Loan Type ........................................................... 43
Interstar Residential Loan Program ................................................... 44
Origination Process ................................................................. 44
Approval and Underwriting Process ................................................... 44
General Features of the Housing Loans ............................................... 47
Special Features of the Housing Loans ............................................... 47
The Mortgage Insurance Policies ...................................................... 49
General ............................................................................. 49
Certain Provisions of Mortgage Insurance Policies ................................... 49
Description of the Mortgage Insurers ................................................ 50
The Title Insurance Policies ......................................................... 52
Cover ............................................................................... 52
Period of Cover ..................................................................... 52
Refusal or Reduction in Claim ....................................................... 52
Exclusions .......................................................................... 53
Description of Title Insurer ........................................................ 53
Description Of The US$ Notes.......................................................... 54
General ............................................................................. 54
Form of the US$ Notes................................................................ 54
Distributions on the Notes .......................................................... 57
Key Dates and Periods ............................................................... 58
Example Calendar .................................................................... 58
Calculation of Income ............................................................... 58
Income .............................................................................. 59
Application of Mortgage Principal Repayments and Liquid Authorized Investments to
Available Income ................................................................... 59
Distribution of Available Income .................................................... 59
Additional Income Payments .......................................................... 61
Interest on the Notes ............................................................... 61
Mortgage Principal Repayments ....................................................... 62
ii
PAGE
-----
Principal Distributions ................................................. 63
Charge-Offs ............................................................. 65
Payments Into US$ Account................................................ 65
Payments Out of US$ Account.............................................. 65
Notices ................................................................. 65
Fixed-Floating Rate Swaps ............................................... 66
The Currency Swaps ...................................................... 67
Redemption of the Notes for Taxation or Other Reasons ................... 71
Redemption of the Notes upon an Event of Default ........................ 72
Optional Redemption of the Notes ........................................ 72
Final Maturity Date ..................................................... 73
Final Redemption of the Notes ........................................... 73
Termination of the Trust ................................................ 74
Prescription ............................................................ 74
Reports to Noteholders .................................................. 75
Voting and Consent of Noteholders ....................................... 76
Description Of The Transaction Documents ................................. 77
Trust Accounts .......................................................... 77
Modifications ........................................................... 77
The Issuer Trustee ...................................................... 78
The Trust Manager ....................................................... 80
The Note Trustee ........................................................ 81
Note Trustee's Annual Report ............................................ 82
List of Noteholders ..................................................... 82
Reports ................................................................. 83
The Security Trust Deed ................................................. 83
The Check Account and Direct Paperless Entry Facilities Agreement ....... 89
The Investment Management Agreement ..................................... 89
The Backup Servicer Agreement ........................................... 92
The Servicer ............................................................. 94
Servicing of Housing Loans .............................................. 94
Collection and Enforcement Procedures ................................... 94
Collection and Foreclosure Process ...................................... 94
Servicer Delinquency Experience ......................................... 96
Prepayment And Yield Considerations ...................................... 97
General ................................................................. 97
Prepayments ............................................................. 97
Weighted Average Lives .................................................. 98
Use Of Proceeds .......................................................... 102
Legal Aspects Of The Housing Loans ....................................... 102
General ................................................................. 102
Nature of Housing Loans as Security ..................................... 102
Strata Title ............................................................ 102
Urban Leasehold ......................................................... 103
Taking Security Over Land ............................................... 103
Enforcement of Registered Mortgages ..................................... 104
Penalties and Prohibited Fees ........................................... 104
Bankruptcy .............................................................. 105
iii
PAGE
-----
Environmental ........................................................... 105
Insolvency Considerations ............................................... 105
Tax Treatment of Interest on Australian Housing Loans ................... 106
Consumer Credit Legislation ............................................. 106
United States Federal Income Tax Matters ................................. 107
Overview ................................................................ 107
Interest Income on the US$ Notes......................................... 108
Sale of Notes ........................................................... 108
Market Discount ......................................................... 108
Premium ................................................................. 109
Backup Withholding ...................................................... 109
Australian Tax Matters ................................................... 111
Payments of Principal, Premiums and Interest ............................ 111
Taxation of Financial Arrangements ...................................... 112
Note Transfers .......................................................... 112
Profit on Sale by Non-Resident Noteholders .............................. 112
Goods and Services Tax .................................................. 113
Fixed-Floating Rate Swaps and GST ....................................... 113
Currency Swaps and GST .................................................. 114
Debt and Equity ......................................................... 114
Other Taxes ............................................................. 114
Taxation of the Trust ................................................... 114
Tax Reform Proposals .................................................... 115
Enforcement Of Foreign Judgments In Australia ............................ 116
Exchange Controls And Limitations ........................................ 116
Anti-terrorism Restrictions ............................................. 116
Prohibited Transactions ................................................. 116
Transactions Which May Be Approved by the Reserve Bank of Australia ..... 117
ERISA Considerations ..................................................... 117
Legal Investment Considerations .......................................... 118
Available Information .................................................... 118
Ratings Of The Notes ..................................................... 118
Plan Of Distribution ..................................................... 119
Underwriting ............................................................ 119
Offering Restrictions ................................................... 120
General Information ...................................................... 122
Listing ................................................................. 122
Authorization ........................................................... 122
Litigation .............................................................. 122
Euroclear and Clearstream, Luxembourg ................................... 122
Announcement ............................................................. 122
Legal Matters............................................................. 122
Glossary ................................................................. 123
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 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
v
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 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.
vi
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.
vii
[This page intentionally left blank.]
viii
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.
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
1
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 A3 notes
FIXED-FLOATING and Class B2 notes
RATE SWAP PROVIDER
National Australia PRINCIPAL PAYING AGENT CLASS A3 NOTEHOLDERS
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
2
SUMMARY OF THE NOTES
The issuer trustee will also issue Class A3 notes and 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, the Class A3 notes 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, the Class A2
notes and the Class A3 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 A3 CLASS B1 CLASS B2
- -----------------------------------------------------------------------------------------------------------------------------------
Aggregate Initial US$675,000,000 A$110,000,000 US$41,000,000 A$15,000,000
Principal Amount:
- -----------------------------------------------------------------------------------------------------------------------------------
% of Total: 84.0% 9.6% 5.1% 1.3%
- -----------------------------------------------------------------------------------------------------------------------------------
Anticipated Ratings: Aaa Aaa Aa3 Aa3
Moody's AAA AAA AA- AA-
S&P
- -----------------------------------------------------------------------------------------------------------------------------------
Interest rate from the three-month LIBOR + three-month three-month LIBOR + three-month
closing date up to 0.25% Australian Bank Bill 0.75% Australian Bank Bill
but excluding the Rate + 0.39% Rate + 1.05%
step-up margin date
- -----------------------------------------------------------------------------------------------------------------------------------
Interest rate from and three-month LIBOR + three-month three-month LIBOR + three-month
including the step-up 0.50% Australian Bank Bill 1.50% Australian Bank Bill
margin date Rate + 0.78% Rate + 2.10%
- -----------------------------------------------------------------------------------------------------------------------------------
Minimum Denominations: US$100,000 and A$10,000 (with initial US$100,000 and A$10,000 (with initial
minimum increments minimum subscription minimum increments minimum subscription
of US$1,000 in of A$500,000) of US$1,000 in of A$500,000)
excess excess
- -----------------------------------------------------------------------------------------------------------------------------------
Interest Accrual actual/360 actual/365 actual/360 actual/365
Method:
- -----------------------------------------------------------------------------------------------------------------------------------
Payment Dates: The 20th day or, if the The 20th day or, if the The 20th day or, if the The 20th day or, if the
20th day is not a 20th day is not a 20th day is not a 20th day is not a
business day, then the business day, then the business day, then the business day, then the
next business day of next business day of next business day of next business day of
each January, April, each January, April, each January, April, each January, April,
July and October. The July and October. The July and October. The July and October. The
first payment date will first payment date will first payment date will first payment date will
be in January 2004. be in January 2004. be in January 2004. be in January 2004.
- -----------------------------------------------------------------------------------------------------------------------------------
Clearance/Settlement: DTC/Euroclear/ Offered in Australia DTC/Euroclear/ Offered in Australia
Clearstream, only Clearstream, only
Luxembourg Luxembourg
- -----------------------------------------------------------------------------------------------------------------------------------
Initial Cut-Off Date: Close of business October 21, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Pricing Date: On or about October 21, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Closing Date: October 28, 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.
- -----------------------------------------------------------------------------------------------------------------------------------
3
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 A notes in their
right to receive interest payments. If the threshold requirements are
satisfied, principal payments will be allocated rateably between the Class A
notes and the Class B notes based on their principal balances. However, if the
threshold requirements are not satisfied, the Class B notes will be
subordinated in their right to receive principal payments. In all cases the
Class B1 notes and the Class B2 notes will rank equally in their right to
receive principal payments. No Class A notes, including the 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 A notes, including the Class A2 notes, will
receive expected quarterly payments of interest and principal. The following
chart describes the initial credit support provided by the Class B notes:
INITIAL SUPPORT
CLASS CREDIT SUPPORT PERCENTAGE
- ------------ ---------------- ----------------
A 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".
4
If issued, Class A1 notes will rank equally with the Class A notes,
including 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 and
the Class A3 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 and the Class A3 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
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
5
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 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$179,000,000 or 25% of the Australian dollar equivalent
of the initial outstanding principal amount of the US$ notes as of the closing
date. See "Description of the Assets of the Trust -- Acquisition of Housing
Loans after the Closing Date".
6
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$1,800,194,286
Maximum Remaining Term to Maturity in months ................... 349
Weighted Average Remaining Term to Maturity in months .......... 344.72
Weighted Average Seasoning in months ........................... 2.29
Weighted Average Original Loan-to-Value Ratio .................. 69.08%
Weighted Average Current Loan-to-Value Ratio ................... 74.11%
Maximum Current Loan-to-Value Ratio ............................ 90.00%
The original loan-to-value ratio of a housing loan is calculated by
comparing the initial principal amount of the housing loan to the most recent
valuation of the property that is currently securing the housing loan. Thus, if
collateral has been released from the mortgage securing a housing loan or if
the property securing the housing loan has been revalued, the original
loan-to-value ratio may not reflect the actual loan-to-value ratio at the
origination of that housing loan.
Before the issuance of the notes, housing loans may be added to or removed
from the housing loan pool. New housing loans may also be substituted for
housing loans that are removed from the housing loan pool. This addition,
removal or substitution of housing loans may result in changes in the housing
loan pool characteristics shown in the preceding table and could affect the
weighted average lives and yields of the notes. The seller will not add, remove
or substitute any housing loans prior to the closing date if this would result
in a change of more than 5% in any of the characteristics of the pool of
housing loans described in the above table, unless a revised prospectus is
delivered to prospective investors.
7
WITHHOLDING TAX
Payments of principal and interest on the US$ 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
Subject to certain considerations described below in "ERISA
Considerations", 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 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;
8
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, the
Class A2 notes and the Class A3 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:
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, the Class A3 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 A
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 pro rata among
the Class A notes based on their principal balances or the Australian dollar
equivalent of their principal balances until such time as all the Class A 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 all of the Class A
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.
9
DISTRIBUTION OF INCOME ON EACH PAYMENT DATE
- --------------------------------------------------------------------------------
Pay to the seller the Accrued Interest Adjustment
- --------------------------------------------------------------------------------
|
|
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Pay any taxes
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|
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Pay pro rata:
o the issuer trustee's fee
o any fees payable to the note trustee
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|
|
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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
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|
|
- --------------------------------------------------------------------------------
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 any interest for the interest period ending on that payment date to the
Class A3 noteholders
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
- --------------------------------------------------------------------------------
|
|
10
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
-------------------------------------------------------------------------------
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|
- --------------------------------------------------------------------------------
Pay fees payable to the seller
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
Pay pro rata the balance to each holder of a residual income unit
- --------------------------------------------------------------------------------
11
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, in each case until such time as all Class A2 notes have been redeemed
in full
o Pay to Class A3 noteholders in payment of the Principal Amount of the
Class A3 notes until such time as all Class A3 notes have been redeemed in
full
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, 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
If the Threshold Requirements are not satisfied, in the following order of
priority:
o first, 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 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 Pay to the Class A3 noteholders in payment of the Principal Amount of the
Class A3 notes until such time as all Class A3 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$10,
and the remaining balance pro rata to each holder of a residual income unit.
- -------------------------------------------------------------------------------
12
RISK FACTORS
The US$ 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 o The notes are debt obligations of the issuer trustee
ONLY FROM THE ASSETS OF only in its capacity as trustee of the trust. The notes
THE TRUST 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 o The rate of principal and interest payments on pools of
THE ACTUAL RATE AND TIMING housing loans varies among pools, and is influenced by
OF PAYMENTS ON THE HOUSING a variety of economic, demographic, social, tax, legal
LOANS and other factors, including prevailing market interest
rates for housing loans and the particular terms of the
housing loans. Australian housing loans have features
and options that are different from housing loans in
the United States, and thus will have different rates
and timing of payments from housing loans in the United
States. There is no guarantee as to the actual rate of
prepayment on the housing loans, or that the actual
rate of prepayments will conform to any model described
in this prospectus. The rate and timing of principal
and interest payments on the housing loans and the
ability to redraw principal on the housing loans will
affect the rate and timing of payments of principal and
interest on your notes. The performance of relevant
counterparties under each mortgage insurance policy,
each title insurance policy, any fixed-floating rate
swap and the currency swaps will also have a key impact
on such payments in terms of both the timeliness of
such payments and the amount of such payments.
Unexpected prepayment rates could have the following
negative effects:
o if you bought your notes for more than
their face amount, the yield on your notes will
drop if principal payments occur at a faster
rate than you expect; or
o if you bought your notes for less than their
face amount, the yield on your notes will drop if
principal payments occur at a slower rate than
you expect.
LOSSES AND DELINQUENT o If borrowers fail to make payments of interest and
PAYMENTS ON THE principal under the housing loans when due and the
HOUSING LOANS MAY AFFECT credit enhancements described in this prospectus are
THE RETURN ON YOUR NOTES not
13
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 o Substantial delays could be encountered in connection
HOUSING LOANS MAY with the liquidation of a housing loan, which may lead
CAUSE DELAYS IN PAYMENT to shortfalls in payments to you to the extent those
AND LOSSES 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 o The liability of a mortgage insurer is governed by the
THE MORTGAGE INSURANCE terms of the relevant mortgage insurance policy, which
POLICIES MAY AFFECT contains certain exclusions that may allow that
THE RETURN ON YOUR NOTES 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 governed by the
THE TITLE INSURANCE terms of the title insurance policy, which contains
POLICIES MAY AFFECT certain exclusions which may allow the title insurer to
THE RETURN ON YOUR reduce a claim or not provide title insurance policy
NOTES 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
14
recover all moneys secured by the relevant mortgage
and thereby affect the ability of the issuer trustee
to pay you principal and interest in full.
THE SUBORDINATION OF THE o The amount of credit enhancement provided through the
CLASS B NOTES PROVIDES subordination of the Class B notes to the Class A notes
ONLY LIMITED PROTECTION is limited and could be depleted prior to the payment
AGAINST LOSSES ON THE in full of the Class A notes. If principal losses
CLASS A NOTES 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 o The underwriters are not required to assist you in
RESELL YOUR NOTES 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 o The issuer trustee will exchange the interest payments
THE SWAPS MAY SUBJECT YOU from any fixed rate housing loans for variable rate
TO LOSSES FROM INTEREST payments based upon the three-month Australian bank
RATE OR CURRENCY bill rate. If a fixed-floating rate swap is terminated
FLUCTUATIONS 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-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.
15
PREPAYMENTS DURING A o If a prepayment is received on a housing loan during a
COLLECTION PERIOD MAY collection period, interest on the housing loan will
RESULT IN YOU NOT cease to accrue on that portion of the housing loan
RECEIVING YOUR FULL that has been prepaid, starting on the date of
INTEREST PAYMENTS 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 o If the security trustee enforces the security interest
THE ENFORCEMENT OF over the assets of the trust after an event of default
THE SECURITY TRUST DEED under the security trust deed, there is no assurance
MAY BE INSUFFICIENT TO that the market value of the assets of the trust will
PAY AMOUNTS DUE TO YOU 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 o If the trust manager directs the issuer trustee to
DIRECTS THE ISSUER redeem the notes early as described in "Description of
TRUSTEE TO REDEEM THE the Notes -- Optional Redemption of the Notes", the
NOTES EARLY, THE purchase of the housing loans will result in the early
YIELD ON YOUR NOTES MAY retirement of your notes, which will shorten their
BE LOWER THAN EXPECTED average lives and potentially lower the yield on your
notes.
THE IMPOSITION OF A o If a withholding tax is imposed on payments by the
WITHHOLDING TAX WILL issuer trustee or any paying agent of interest on your
REDUCE PAYMENTS TO YOU notes, you will not be entitled to receive grossed-up
AND MAY TO AN EARLY amounts to compensate for such withholding tax. Thus,
REDEMPTION OF THE LEAD you will receive less interest than is scheduled to be
NOTES 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 exercised, you may not be able to reinvest the
redemption payments at a comparable interest rate.
16
THE FEATURES OF THE o The features of the housing loans, including their
HOUSING LOANS MAY CHANGE, interest rates, may be changed by the servicer, either
WHICH COULD AFFECT THE on its own initiative or at a borrowers' request. Some
TIMING AND AMOUNT OF of these changes may include the addition of newly
PAYMENTS TO YOU developed features which are not described in this
prospectus. As a result of these changes and borrowers'
payments of principal, the concentration of housing
loans with specific characteristics is likely to change
over time, which may affect the timing and amount of
payments you receive.
o If the servicer changes the features of the housing
loans, borrowers may elect to refinance their loan with
another lender to obtain more favorable features. The
refinancing of housing loans could cause you to
experience higher rates of principal prepayment than
you expected, which could affect the yield on your
notes.
THERE ARE LIMITS ON THE o If the interest collections during a collection period
AMOUNT OF AVAILABLE and liquid authorized investments are insufficient to
LIQUIDITY TO ENSURE cover X fees, expenses and the interest payments due
PAYMENTS OF INTEREST with respect to the notes on the next payment date,
TO YOU 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 o If liquid authorized investments or principal
AUTHORIZED INVESTMENTS collections are drawn upon to cover shortfalls in
OR PRINCIPAL COLLECTIONS interest, and there is insufficient excess income in
TO COVER LIQUIDITY succeeding collection periods to repay those liquid
SHORTFALLS MAY LEAD TO authorized investments or principal collections, you
PRINCIPAL LOSSES may not receive full repayment of principal on your
notes.
A DECLINE IN AUSTRALIAN o The Australian economy has been experiencing a
ECONOMIC CONDITIONS MAY prolonged period of expansion with relatively low and
LEAD TO LOSSES OR DELAYS stable interest rates and steadily increasing property
IN PAYMENTS ON YOUR NOTES 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 o Some of the housing loans are regulated by the Consumer
MAY AFFECT THE TIMING OR Credit Legislation. Under that legislation, a borrower
AMOUNT OF INTEREST OR may have a right to apply to a court to:
PRINCIPAL PAYMENTS TO YOU
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;
17
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 o The trust contains a high concentration of housing
HOUSING LOANS IN SPECIFIC loans secured by properties located within New South
GEOGRAPHIC AREAS MAY Wales, Victoria and Queensland. Any deterioration in
INCREASE THE POSSIBILITY OF the real estate values or the economy of either of
LOSS ON YOUR NOTES those States could result in higher rates of
delinquencies, foreclosures and loss than expected on
the housing loans. In addition, either of these States
may experience natural disasters, which may not be
fully insured against and which may result in property
damage and losses on the housing loans. These events
may in turn have a disproportionate impact on funds
available to the trust, which could cause you to suffer
losses.
YOU WILL NOT RECEIVE o Your ownership of the notes will be registered
PHYSICAL NOTES electronically through DTC, Euroclear and/or
REPRESENTING YOUR NOTES, Clearstream, Luxembourg. The lack of physical
WHICH CAN CAUSE DELAYS IN certificates could:
RECEIVING DISTRIBUTIONS
AND HAMPER YOUR ABILITY o cause you to experience delays in receiving payments on
TO PLEDGE OR RESELL YOUR the notes because the principal paying agent will be
NOTES sending distributions on the notes to DTC instead of
directly to you;
o limit or prevent you from using your notes as
collateral; and
18
o hinder your ability to resell the notes
or reduce the price that you receive for them.
SINCE THE TRUST MANAGER, o Each of Interstar Securitisation Management Pty
THE ISSUER TRUSTEE AND THE Limited, Perpetual Trustees Victoria Limited and
SERVICER ARE AUSTRALIAN Interstar Securities (Australia) Pty Limited is an
ENTITIES, THERE REMAINS Australian company and has agreed to submit to the
UNCERTAINTY AS TO THE jurisdiction of the New York State and United States
ENFORCEABILITY OF federal courts for purposes of any suit, action or
JUDGMENTS OBTAINED BY proceeding arising out of the offering of the US$
US$ NOTEHOLDERS IN U.S. notes. Generally, a final and conclusive judgment
COURT BY AUSTRALIAN obtained by noteholders in U.S. courts would be
COURTS 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 o The issuer trustee may issue Class A1 notes to fund
NOTES MAY AFFECT THE TIMING redraws of previously prepaid principal under the
AND AMOUNT OF PAYMENTS MADE housing loans if principal collections on the housing
ON THE CLASS A AND CLASS B1 loans are not sufficient. See "Interstar Residential
NOTES Loan Program -- Special Features of the Housing Loans
-- Redraws". The Class A1 notes will be senior to the
other Class A notes, including the Class A2 notes, and
the Class B1 notes with respect to payments of
principal and rank equally with the other Class A
notes, including 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 A notes in all respects
thereafter. If the proceeds of enforcement of the
charge pursuant to the security trust deed are not
sufficient to pay all obligations of the issuer trustee
under the terms and conditions of the notes, the risk
to you of a loss on your investment in any Class A2
notes or Class B1 notes is greater if any Class A1
notes are outstanding at that time.
THE CLASS B1 NOTES ARE o Prior to the enforcement of the charge under the
SUBORDINATED TO THE security trust deed, the Class B1 notes will, in some
CLASS A NOTES AND circumstances, be subordinated to the Class A notes in
THEREFORE CLASS B1 their right to receive principal payments and will be
NOTEHOLDERS MAY NOT BE subordinated to the Class A notes at all times in their
PAID ALL PRINCIPAL AND right to receive interest payments. Following the
INTEREST ON THE CLASS B1 occurrence of an event of default and enforcement of
NOTES 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.
19
Accordingly, Class B1 noteholders may not be paid
principal and interest in full in respect of the
Class B1 notes. Therefore you may not receive your
entire investment or the yield you expected to receive.
PREPAYMENTS COULD RESULT o If there is any principal amount remaining in the
FROM PREFUNDING 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 o The servicer is obligated under the transaction
RESPONSIBILITY TO MANAGE documents to set the interest rates on the housing
THE INTEREST RATE EXPOSURE loans at a rate to ensure that at all times the issuer
MAY AFFECT THE RATE OF trustee has sufficient cash available to pay all
REPAYMENTS AND THE YIELD interest payable on the notes and otherwise comply with
ON YOUR INVESTMENT 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 o Upon termination of a swap, a termination payment will
RELATING TO THE be due either from the issuer trustee to the swap
CURRENCY SWAPS OR A provider or vice versa. If the swap provider is
FIXED-FLOATING RATE required to make a termination payment to the issuer
SWAP ARE SUBJECT TO trustee upon the termination of a swap, then the trust
CREDIT RISKS will be exposed to credit risk in relation to the
capacity of that swap provider to make that termination
payment.
CURRENCY SWAP TERMINATION o If the Class A2 currency swap or the Class B1 currency
PAYMENT TO THE CURRENCY swap terminates before its scheduled termination date,
SWAP PROVIDER MAY REDUCE a termination payment by either the issuer trustee or
PAYMENTS ON YOUR US$ NOTES 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
20
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 characteristics of
INFORMATION REGARDING ONLY the housing loan pool as of September 1, 2003. While
A PORTION OF THE HOUSING they must satisfy the criteria specified in this
LOAN POOL, AND ADDITIONAL prospectus, the housing loans acquired on the closing
HOUSING LOANS ADDED TO THE date, and any additional housing loans transferred to
HOUSING LOAN POOL COULD the trust during the prefunding period, may not have
HAVE DIFFERENT the characteristics or statistical composition of the
CHARACTERISTICS 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 o It is a condition to the issuance of the Class A2 notes
DO NOT INSURE THEIR PAYMENT that they be rated Aaa by Moody's and AAA by S&P and
AND WITHDRAWAL OF ANY that the Class B1 notes be rated at least Aa3 by
RATINGS MAY AFFECT THE Moody's and AA-- by S&P. See "Ratings of the Notes"
VALUE OF THE US$ 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
21
subordination provided by the Class B notes with respect
to the Class A notes.
FAILURE OF THE SERVICER o The servicer under the investment management OF
TO PERFORM ITS OBLIGATIONS agreement has been appointed as initial servicer of the
MAY AFFECT THE TIMING housing loans. Following a servicer event of default
PAYMENTS ON YOUR NOTES 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 o The servicer will make certain representations and
MAY NOT HAVE THE warranties to the issuer trustee, to each noteholder
CHARACTERISTICS AS SET and to the security trustee in relation to the housing
OUT IN THE REPRESENTATIONS loans to be assigned to the issuer trustee, as at the
AND WARRANTIES MADE BY cut-off date and the purchase date for those housing
THE SERVICER 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 o The trust manager, not the issuer trustee, takes
NOT BE AVAILABLE TO responsibility for this prospectus. As a result, in the
COVER ANY LOSSES SUFFERED event that a person suffers loss due to any information
BY YOU FOR ANY MISLEADING contained in this prospectus that is inaccurate or
STATEMENT OR OMISSION OF misleading, or omitting a material matter or thing,
A MATERIAL MATTER IN that person will not have recourse to the assets of the
THIS PROSPECTUS trust.
YOU MAY EXPERIENCE o The verification requirements for Latinum Low Doc Loans
LOSSES ON YOUR NOTES and Retro Low Doc Loans, both known as the Low Doc
DUE TO REDUCED Loans, are less exhaustive than the verification
VERIFICATION REQUIREMENTS requirements for housing loans originated through
FOR LOW DOC LOANS 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
22
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.
23
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
123.
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.
24
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
David Bryant ................. Level 7, 9 Castlereagh Street Director
Sydney, NSW, Australia
Bradley Fresia ............... 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.
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.
25
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 an 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
ultimately owned by CPH Management Ltd, in its capacity as responsible entity
of Challenger Financial Services Group.
Arcturus Management Pty Limited as trustee of the Arcturus Trust (in that
capacity 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.
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,
including ZCMAH. Following its sale to CPH Management Ltd, on September 29,
2003, ZCMAH exercised its option to acquire all of the shares of Interstar
Holdings under the call option arrangement. As a result, Interstar
Securitisation Management Pty Limited and Interstar Securities (Australia) Pty
Limited are wholly-owned subsidiaries of CPH Management Ltd in its capacity as
responsible entity of Challenger Financial Services Group.
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
26
for Real Estate Finance, headquartered in Washington, D.C., USA, and has
served on the International Committee of the Mortgage Bankers Association
of America. He was a co-founder of the Mortgage Industry Association of
Australia, its National President from 1986 until 1988, and its Victorian
State President from 1984 until 1998. He was awarded Life Membership of
the Association in 1998. He has been actively involved with all aspects
of the mortgage industry for the past 30 years, and is presently
responsible for the strategic direction of the Interstar Securities
Group.
o SAM KYRIACOU has been a Director and the Chief Financial Officer of
Interstar Securities (Australia) Pty Limited since its inception, and was
appointed Managing Director and Chief Executive Officer on July 1, 1999.
He holds a Bachelor of Commerce degree from Melbourne University and is
an Associate of the Institute of Chartered Accountants in Australia. He
is responsible for all aspects of the operations of Interstar Securities
(Australia) Pty Limited, including wholesale mortgage loan origination,
loan product development and wholesale funding programs.
o BASIL CARIDAKIS has been a Director of Interstar Securities (Australia)
Pty Limited since its inception and is responsible for retail loan
origination and marketing. He has been involved with mortgage lending and
financial services for the past 25 years and is an Associate of the
Mortgage Industry Association of Australia. He has been responsible for
marketing and origination of mortgage loan products, liaison with loan
originators and retailers and direct contact with borrowers for Interstar
Securities Pty Limited since 1992 and for Interstar Securities
(Australia) Pty Limited since its inception.
o ANDREW MOBILIA has been a Director of Interstar Securities (Australia)
Pty Limited since its inception and is responsible for lending and loan
administration. He has been involved with all aspects of secured lending,
administration and credit control for the past 25 years and is an
Associate of the Mortgage Industry Association of Australia. He has been
responsible for all aspects of managed asset compliance, loan review and
underwriting and arrears management for Interstar Securities Pty Limited
since 1992 and for Interstar Securities (Australia) Pty Limited since its
inception.
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.
27
Interstar Securities (Australia) Pty Limited is currently ranked as a
"Strong" residential loan servicer in Australia by S&P, and has been approved
by S&P as a "Global Select Servicer" for structured finance transactions.
THE 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.
28
DESCRIPTION OF THE TRUST
INTERSTAR MILLENNIUM TRUSTS SECURITIZATION PROGRAM
The Interstar Millennium Trusts securitization program was established
pursuant to a master trust deed for the purpose of enabling Perpetual Trustees
Victoria Limited, as trustee of each trust established pursuant to the
Interstar Millennium Trusts securitization program, to invest in pools of
housing loans originated from time to time by the servicer. The master trust
deed provides for the creation of an unlimited number of trusts. The master
trust deed establishes the general framework under which trusts may be
established from time to time. It does not actually establish any trusts. The
Interstar Millennium Series 2003-5G 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.
29
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.
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
30
US$675,000,000 and the Class B1 A$ Equivalent of US$41,000,000, or 25% of the
sum of the Class A2 A$ 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 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;
31
o as at the applicable cut-off date, none of the housing loans were
satisfied, cancelled, discharged or rescinded and the mortgaged property
relating to each housing loan had not been released from the relevant
mortgage;
o the housing loans are assignable and all consents required in relation
to the assignment of the housing loans and ancillary rights have been
obtained;
o between the applicable cut-off date and the closing date the servicer
dealt with the housing loans in the ordinary course of its business;
o as of the applicable cut-off date, each housing loan satisfies the
following eligibility criteria:
o it is denominated and payable only in Australian dollars in Australia;
o the interest rate applicable to the housing loan is either:
o a variable rate based upon any determinant as may be considered
appropriate by the servicer in its absolute discretion;
o a fixed rate provided that:
o the fixed rate does not apply for a continuous period exceeding
five years from:
o the settlement date of the housing loan, where the housing
loan bears a fixed rate of interest from the date it is
settled; or
o the date on which the housing loan starts to bear a fixed
rate of interest, where that housing loan either:
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;
32
o the housing loan and mortgage are valid and enforceable;
o all applicable stamp duties have been paid on the mortgage securing the
housing loan;
o the housing loan and mortgage securing the housing loan will form part
of the assets of the trust;
o the whole of the right, title and interest of the mortgagee under the
mortgage securing the housing loan will be acquired by the issuer
trustee;
o the housing loan has been serviced and managed in accordance with the
requirements of the servicer's policy and procedures manual;
o the mortgage insurance policy and any title insurance policy in relation
to the housing loan and the mortgage securing the housing loan does not
restrict the assignment to the issuer trustee;
o the housing loan is not in arrears over 30 days at the applicable
cut-off date;
o the housing loan is subject to monthly, fortnightly or weekly payments
which fully amortize the housing loan over its term;
o the loan agreement and the mortgage securing the housing loan comply in
all material respects with all applicable laws, including any Consumer
Credit Legislation;
o the loan agreement and the mortgage securing the housing loan are
assignable by the 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:
o where the mortgaged property is property within the metropolitan
areas of Australia other than Tasmania or the Northern Territory --
A$500,000; or
33
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%;
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.
34
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;
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.
35
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 (greater than) 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 (greater than) $300,000 (by number).............. 22.95%
% of pool with loans (greater than) $300,000 (by loan amount)......... 40.74%
% of pool in arrears (by loan amount):
1-30 days................................................................ 1.31%
31-60 days............................................................... 0.00%
61+ days................................................................. 0.00%
Total................................................................... 1.31%
HOUSING LOANS BY OCCUPANCY
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ 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%
===== ====== ============= ====== ======= =====
36
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 %
-------- ----------- --------------- ---------- --------- -----------
(less than) =20% ............................. 105 1.89% 4,890,239 0.39% 46,574 14.91%
(greater than) 20% and = (less than) 25% ..... 43 0.78% 4,138,535 0.33% 96,245 22.65%
(greater than) 25% and = (less than) 30% ..... 56 1.01% 6,579,872 0.53% 117,498 27.61%
(greater than) 30% and = (less than) 35% ..... 74 1.33% 8,856,594 0.71% 119,684 32.34%
(greater than) 35% and = (less than) 40% ..... 90 1.62% 12,729,538 1.02% 141,439 37.56%
(greater than) 40% and = (less than) 45% ..... 90 1.62% 15,655,913 1.25% 173,955 42.61%
(greater than) 45% and = (less than) 50% ..... 149 2.69% 29,133,217 2.33% 195,525 47.82%
(greater than) 50% and = (less than) 55% ..... 211 3.80% 41,695,488 3.33% 197,609 52.65%
(greater than) 55% and = (less than) 60% ..... 267 4.81% 57,915,875 4.63% 216,913 57.48%
(greater than) 60% and = (less than) 65% ..... 310 5.59% 69,650,873 5.57% 224,680 62.76%
(greater than) 65% and = (less than) 70% ..... 397 7.16% 88,277,522 7.06% 222,362 67.01%
(greater than) 70% and = (less than) 75% ..... 430 7.75% 106,191,595 8.48% 246,957 72.49%
(greater than) 75% and = (less than) 80% ..... 1,045 18.84% 251,136,980 20.07% 240,322 78.24%
(greater than) 80% and = (less than) 85% ..... 1,422 25.64% 348,961,983 27.90% 245,402 80.34%
(greater than) 85% and = (less than) 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%
===== ====== ============= ====== ======= =====
37
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 %
-------- ----------- --------------- ---------- ------------ -----------
(less than) =100,000 .............................. 709 12.78% 43,481,287 3.48% 61,328 60.67%
(greater than) 100,000 and (less than) = 150,000 901 16.25% 113,822,375 9.10% 126,329 68.62%
(greater than) 150,000 and (less than) = 200,000 990 17.85% 172,409,013 13.78% 174,151 73.11%
(greater than) 200,000 and (less than) = 250,000 933 16.83% 208,513,072 16.66% 223,487 75.33%
(greater than) 250,000 and (less than) = 300,000 740 13.34% 203,178,692 16.23% 274,566 76.73%
(greater than) 300,000 and (less than) = 350,000 437 7.88% 140,608,038 11.24% 321,758 76.07%
(greater than) 350,000 and (less than) = 400,000 335 6.04% 124,742,286 9.97% 372,365 76.08%
(greater than) 400,000 and (less than) = 500,000 338 6.09% 149,948,840 11.99% 443,636 75.75%
(greater than) 500,000 and (less than) = 750,000 151 2.72% 83,858,513 6.70% 555,354 72.27%
(greater than) 750,000 and (less than) = 950,000 9 0.16% 7,140,674 0.57% 793,408 75.35%
(greater than) 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%
===== ====== ============= ====== ========= =====
38
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 %
-------- ----------- --------------- ---------- --------- -----------
(less than) = 3 months ......................... 4,800 86.54% 1,089,071,086 87.05% 226,890 73.66%
(greater than) 3 and (less than) = 6 months .. 598 10.78% 126,616,149 10.12% 211,733 74.98%
(greater than) 6 and (less than) = 12 months . 139 2.51% 33,567,712 2.68% 241,494 85.64%
(greater than) 12 and (less than) = 18 months 7 0.13% 1,309,055 0.10% 187,008 68.24%
(greater than) 18 and (less than) = 24 months 1 0.02% 500,218 0.04% 500,218 76.96%
(greater than) 24 and (less than) = 36 months 0 0.00% 0 0.00% 0 0.00%
(greater than) 36 and (less than) = 48 months 0 0.00% 0 0.00% 0 0.00%
(greater than) 48 and (less than) = 60 months 1 0.02% 62,523 0.01% 62,523 27.79%
(greater than) 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%
===== ====== ============= ====== ======= =====
39
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 %
-------- ----------- --------------- ---------- --------- -----------
(less than) =20% .............................. 11 2.69% 578,542 0.56% 52,595 15.88%
(greater than) 20% and = (less than) 25% ...... 6 1.47% 535,422 0.51% 89,237 23.73%
(greater than) 25% and = (less than) 30% ...... 5 1.23% 669,417 0.64% 133,883 27.51%
(greater than) 30% and = (less than) 35% ...... 8 1.96% 1,141,630 1.10% 142,704 32.34%
(greater than) 35% and = (less than) 40% ...... 4 0.98% 1,166,442 1.12% 291,611 38.58%
(greater than) 40% and = (less than) 45% ...... 4 0.98% 1,013,205 0.97% 253,301 43.44%
(greater than) 45% and = (less than) 50% ...... 7 1.72% 1,623,688 1.56% 231,955 48.34%
(greater than) 50% and = (less than) 55% ...... 12 2.94% 2,799,651 2.69% 233,304 52.96%
(greater than) 55% and = (less than) 60% ...... 14 3.43% 4,368,319 4.20% 312,023 58.12%
(greater than) 60% and = (less than) 65% ...... 25 6.13% 7,772,077 7.47% 310,883 62.94%
(greater than) 65% and = (less than) 70% ...... 29 7.11% 7,837,195 7.54% 270,248 67.40%
(greater than) 70% and = (less than) 75% ...... 28 6.86% 6,783,978 6.52% 242,285 72.12%
(greater than) 75% and = (less than) 80% ...... 85 20.83% 23,993,264 23.08% 282,274 78.23%
(greater than) 80% and = (less than) 85% ...... 115 28.19% 30,075,198 28.93% 261,523 80.24%
(greater than) 85% and = (less than) 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%
=== ====== =========== ====== ======= =====
40
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 %
-------- ----------- --------------- ---------- --------- -----------
(less than) =20% .............................. 14 1.60% 498,341 0.25% 35,596 11.96%
(greater than) 20% and = (less than) 25% ...... 4 0.46% 711,056 0.35% 177,764 21.72%
(greater than) 25% and = (less than) 30% ...... 10 1.14% 1,286,143 0.64% 128,614 27.72%
(greater than) 30% and = (less than) 35% ...... 12 1.37% 1,353,126 0.67% 112,761 32.99%
(greater than) 35% and = (less than) 40% ...... 24 2.74% 2,803,301 1.40% 116,804 37.66%
(greater than) 40% and = (less than) 45% ...... 17 1.94% 3,074,430 1.53% 180,849 42.33%
(greater than) 45% and = (less than) 50% ...... 34 3.89% 8,264,963 4.12% 243,087 47.74%
(greater than) 50% and = (less than) 55% ...... 31 3.54% 6,265,266 3.12% 202,105 52.30%
(greater than) 55% and = (less than) 60% ...... 41 4.69% 9,228,956 4.60% 225,096 57.02%
(greater than) 60% and = (less than) 65% ...... 50 5.71% 10,359,820 5.17% 207,196 62.68%
(greater than) 65% and = (less than) 70% ...... 66 7.54% 15,122,004 7.54% 229,121 66.89%
(greater than) 70% and = (less than) 75% ...... 63 7.20% 17,554,224 8.75% 278,638 72.56%
(greater than) 75% and = (less than) 80% ...... 165 18.86% 40,964,453 20.45% 248,269 78.18%
(greater than) 80% and = (less than) 85% ...... 217 24.81% 55,036,410 27.44% 253,624 80.29%
(greater than) 85% and = (less than) 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 %
-------- ----------- --------------- ---------- --------- -----------
(less than) =20% .............................. 80 1.88% 3,813,356 0.40% 47,667 15.15%
(greater than) 20% and = (less than) 25% ...... 33 0.77% 2,892,058 0.31% 87,638 22.68%
(greater than) 25% and = (less than) 30% ...... 41 0.96% 4,624,311 0.49% 112,788 27.59%
(greater than) 30% and = (less than) 35% ...... 54 1.27% 6,361,838 0.67% 117,812 32.21%
(greater than) 35% and = (less than) 40% ...... 62 1.45% 8,759,796 0.93% 141,287 37.40%
(greater than) 40% and = (less than) 45% ...... 69 1.62% 11,568,277 1.22% 167,656 42.61%
(greater than) 45% and = (less than) 50% ...... 108 2.53% 19,244,565 2.03% 178,190 47.81%
(greater than) 50% and = (less than) 55% ...... 168 3.94% 32,630,571 3.45% 194,230 52.69%
(greater than) 55% and = (less than) 60% ...... 212 4.97% 44,318,601 4.68% 209,050 57.51%
(greater than) 60% and = (less than) 65% ...... 235 5.51% 51,518,976 5.44% 219,230 62.75%
(greater than) 65% and = (less than) 70% ...... 302 7.08% 65,318,322 6.90% 216,286 67.00%
(greater than) 70% and = (less than) 75% ...... 339 7.95% 81,853,395 8.65% 241,455 72.50%
(greater than) 75% and = (less than) 80% ...... 795 18.65% 186,179,261 19.67% 234,188 78.26%
(greater than) 80% and = (less than) 85% ...... 1,090 25.57% 263,850,376 27.87% 242,065 80.36%
(greater than) 85% and = (less than) 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%
===== ====== =========== ====== ======= =====
41
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 %
-------- ----------- --------------- ---------- --------- -----------
(less than) = 5.00 .......................... 4 0.07% 847,908 0.07% 211,977 62.87%
(greater than) 5.01 and (less than) = 5.50 29 0.52% 6,048,375 0.48% 208,565 74.31%
(greater than) 5.51 and (less than) =6.00 . 1,148 20.71% 267,610,632 21.39% 233,110 71.87%
(greater than) 6.01 and (less than) = 6.50 1,835 33.09% 421,009,227 33.65% 229,433 76.56%
(greater than) 6.51 and (less than) = 7.00 1,181 21.29% 258,146,261 20.63% 218,583 72.08%
(greater than) 7.01 and (less than) = 7.50 1,075 19.38% 238,734,767 19.08% 222,079 73.99%
(greater than) 7.51 and (less than) = 8.00 222 4.00% 47,740,165 3.82% 215,046 76.31%
(greater than) 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%
===== ====== ============= ====== ======= =====
42
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 AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ 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%
===== ====== ============= ====== ======= =====
43
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.
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;
44
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.
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)
45
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.
46
GENERAL FEATURES OF THE HOUSING LOANS
The housing loans may consist of one or more of the following types:
Name of Housing Loan General Characteristics of Housing Loan
Interstar "Premium" Amortizing principal and interest repayment (P&I) loans with an
Access Account interest rate variable at the discretion of the servicer and
incorporating limited "redraw" facilities that will be available to
borrowers only at the sole discretion of the trust manager.
Interstar "Fix'n Float" Amortizing "P&I" loans with an interest rate fixed for a specific
Access Account initial period of up to five years after which the interest rate converts
to a variable rate at the discretion of the servicer.
Interstar "IO Float" Non-amortizing loans requiring interest only repayments by the
Access Account borrowers for a specific initial period of up to ten years with an
interest rate variable at the discretion of the servicer. At the
expiration of the initial period the loans convert to the standard
amortizing "P&I" loans with an interest rate variable at the
discretion of the servicer.
Interstar "IO Fixed" Non-amortizing loans requiring interest only repayments by the
Access Account 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" Amortizing line of credit "P&I" loans with an interest rate variable at
Access Account 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" A combined facility which:
Access Account
o as to a specified Australian dollar proportion of the facility has
the general characteristics of one type of housing loan as
referred to above; and
o as to the remaining Australian dollar proportion of the facility
has the general characteristics of another type of housing loan
as referred to above.
Each housing loan may have some or all of the features described in this
section. In addition, during the term of any housing loan the servicer may
agree to change any of the terms of that housing loan from time to time at the
request of the borrower.
SPECIAL FEATURES OF THE HOUSING LOANS
REDRAWS
Most housing loans, excluding fixed rate loans, provide borrowers with a
facility which allows borrowers to be provided with redraws. These redraws may
be accessed by way of direct credit to the relevant borrower's nominated bank
account, by electronic funds transfer or by check payments. This facility is
provided to a borrower at the absolute discretion of the servicer.
47
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.
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.
48
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;
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.
49
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.
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.
50
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 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.
51
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;
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.
52
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.
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$4.7 billion and approximately 24,886 employees worldwide in
2002. First American Title Insurance Company is publicly traded on the New York
Stock Exchange through its holding company, the First American Financial
Corporation.
A.M. Best Company, an insurance company ratings and information agency,
affirmed in 2002 the current rating for First American Title Insurance Company
of Australia Pty Limited of A+ (Superior). A.M. Best Company evaluates title
insurers from both an insurance and general industry perspective.
First American Title Insurance Company and First American Financial
Corporation have a rating of "A-" from S&P. First American Financial
Corporation's senior debt is rated "stable" by S&P.
53
DESCRIPTION OF THE US$ 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 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,
54
on the other, will be effected by DTC in accordance with DTC's rules on behalf
of the relevant European international clearing system by that system's
depositary. However, these cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in that system in accordance with its rules and procedures and
within its established deadlines, European time. The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its depositary to take action to effect
final settlement on its behalf by delivering or receiving securities in DTC,
and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Clearstream, Luxembourg
participants and Euroclear participants may not deliver instructions directly
to their system's depositary.
Because of time-zone differences, credits of securities in Clearstream,
Luxembourg or Euroclear as a result of a transaction with a DTC participant
will be made during the subsequent securities settlement processing, dated the
business day following the DTC settlement date. The credits for any
transactions in these securities settled during this processing will be
reported to the relevant Clearstream, Luxembourg participant or Euroclear
participant on that business day. Cash received in Clearstream, Luxembourg or
Euroclear as a result of sales of securities by or through a Clearstream,
Luxembourg participant or a Euroclear participant to a DTC participant will be
received and available on the DTC settlement date. However, it will not be
available in the relevant Clearstream, Luxembourg or Euroclear cash account
until the business day following settlement in DTC.
Purchases of US$ notes held through the DTC system must be made by or
through DTC participants, which will receive a credit for the US$ notes on
DTC's records. The ownership interest of each actual US$ noteholder is in turn
to be recorded on the DTC participants' and indirect participants' records.
US$ noteholders will not receive written confirmation from DTC of their
purchase. However, noteholders are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the DTC participant or indirect participant through which the
noteholder entered into the transaction. Transfers of ownership interests in
the US$ notes are to be accomplished by entries made on the 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
55
of the issuer trustee, disbursement of the payments to DTC participants is the
responsibility of DTC, and disbursement of the payments to US$ noteholders is
the responsibility of DTC participants and indirect participants.
DTC may discontinue providing its services as securities depository for
the notes at any time by giving reasonable notice to the principal paying
agent. Under these circumstances, if a successor securities depository is not
obtained, definitive notes are required to be printed and delivered.
According to DTC, the foregoing information about DTC has been provided
for informational purposes only and is not intended to serve as a
representation, warranty, or contract modification of any kind.
Clearstream, Luxembourg is a company with limited liability incorporated
under the laws of Luxembourg. Clearstream, Luxembourg holds securities for its
participating organizations and facilitates the clearance and settlement of
securities transactions between Clearstream, Luxembourg participants through
electronic book-entry changes in accounts of Clearstream, 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.
56
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 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.
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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 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.
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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 outstanding Principal Amount of the Class A3
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 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;
59
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 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 any interest on the Class A3 notes for the Interest Period ending on
that payment date to the Class A3 noteholders;
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
60
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.
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, 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 0.25% in respect of the Class A2 notes and a
margin of 0.75% 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 0.50% in respect of the Class A2 notes and a margin of 1.50% in
respect of the Class B1 notes.
Up to, and including, the Step-Up Margin Date, the interest rate for the
Class A3 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 0.39%. If the issuer
trustee has not redeemed all of the Class A3 notes by the Step-Up Margin Date
then
61
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 0.78%.
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 1.05%. 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 2.10%.
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, the Class A3 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;
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.
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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 the Class A3 noteholders in payment of the Principal
Amount of the Class A3 notes until such time as all of the Class A3
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 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 four 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, 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
63
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 to pay to the Class A3 noteholders in payment of the Principal
Amount of the Class A3 notes until such time as all Class A3 notes
have been redeemed in full;
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$10, and the remaining balance pro rata to each
holder of a residual income unit.
The issuer trustee, pursuant to the directions provided by the trust
manager, will only make a payment described in any of the preceding bullet
points above in this section to the extent that any Mortgage Principal
Repayments and Recovery Amounts remain from which to make the payment after
amounts with priority to that payment have been fully paid. The issuer trustee
will only use Liquid Authorized Investments in the third, fourth and fifth
bullet points above to the extent that the application of Liquid Authorized
Investments will not reduce the value of Liquid Authorized Investments to less
than the Prescribed Minimum Level.
The THRESHOLD REQUIREMENTS will be met if each of the following conditions
are satisfied:
o there are no Carryover Charge-Offs;
o no more than 5% of the housing loans (by unpaid principal balance) are
in arrears by an amount equal to two or more monthly payments at the
time;
o an amount equal to the aggregate of:
1. the Class B1 A$ 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 Initial Principal Amount of all Class A3 notes; plus
3. the Class B1 A$ Equivalent of the Initial Principal Amount of all
Class B1 notes; plus
4. 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;
64
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 Principal Amount of all Class A3 notes at the time; plus
3. the Class B1 A$ Equivalent of the Principal Amount of all Class B1
notes at the time; plus
4. 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
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.
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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 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 immediately, 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; and
o if the fixed-floating rate swaps are not novated to a replacement
fixed-floating rate swap provider within:
o 30 days, if the fixed-floating rate swap provider is downgraded to
less than a short term credit rating of A-1 by S&P or less than a
short term credit rating of P-1 by Moody's or not less than a long
term credit rating of A-3 by Moody's; or
o 5 business days, if the fixed-floating rate swap provider is
downgraded to less than a long term credit rating of A3 by Moody's,
then the fixed-floating rate swap provider must cash collateralize its
obligations.
Where the fixed-floating rate swap provider must or elects to cash
collateralize its obligations, 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:
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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
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.
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
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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$0.6990 = A$1.00. Under the Class B1 currency swap, the equivalent
United States dollar payment will be calculated using an exchange rate of
US$0.6990 = 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 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:
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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 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
short term credit rating by Moody's to lower than P-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.
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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 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.
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SWAP COLLATERAL ACCOUNT
If a swap provider provides cash collateral to the issuer trustee:
o the trust manager must direct the issuer trustee, and the issuer trustee
must, as soon as practicable, establish and maintain in the name of the
issuer trustee a swap collateral account with an Approved Bank such that
the deposit does not cause a downgrade or withdrawal of the rating of any
notes; and
o the swap provider must deposit the cash collateral in the swap
collateral account.
The issuer trustee may only make withdrawals from 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
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;
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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.
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;
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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 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
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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;
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.
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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 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.
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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
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.
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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.
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
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relating to the trust. No act or omission of the issuer trustee, including any
related failure to satisfy its obligations or breach of representation or
warranty under the transaction documents, any fixed-floating rate swap and the
currency swaps, will be considered fraud, negligence or wilful default of the
issuer trustee to the extent to which the act or omission was caused or
contributed to by any failure by such person -- other than a person whose acts
or omissions the issuer trustee is liable for in accordance with the
transaction documents, any fixed-floating rate swap and the currency swaps --
to fulfil its obligations relating to the trust or by any other act or omission
of any such person -- other than a person whose acts or omissions the issuer
trustee is liable for in accordance with the transaction documents, any
fixed-floating rate swap and a currency swap -- regardless of whether or not
that act or omission is purported to be done on behalf of the issuer trustee.
No attorney, agent, receiver or receiver and trust manager appointed in
accordance with a transaction document has authority to act on behalf of the
issuer trustee in a way which exposes the issuer trustee to any personal
liability and no act or omission of any such person will be considered fraud,
negligence or wilful default of the issuer trustee provided, in the case of any
person selected and appointed by the issuer trustee, that the issuer trustee
has exercised reasonable care in the selection of such persons.
RIGHTS OF INDEMNITY OF ISSUER TRUSTEE
The issuer trustee will be indemnified out of the assets of the trust
against all losses and liabilities properly incurred by the issuer trustee in
performing its duties or exercising its powers under the transaction documents,
any fixed-floating rate swap and the currency swaps in relation to the trust
except to the extent that such losses and liabilities arose as a result of the
issuer trustee's fraud, negligence or wilful default.
The issuer trustee is indemnified out of the assets of the trust against
certain payments it may be liable to make under any Consumer Credit
Legislation. The trust manager also indemnifies the issuer trustee in relation
to such payments and the issuer trustee is required to first call on the
indemnity from the trust manager before calling on the indemnity from the
assets of the trust.
THE TRUST MANAGER
POWERS
The trust manager will have full and complete powers of management of the
trust, including the administration and servicing of the assets which are not
serviced by the servicer, borrowings and other liabilities of the trust and the
conduct of the day to day operation of the trust.
The issuer trustee has no duty to supervise the trust manager in the
performance of its functions and duties, or the exercise of its discretions.
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.
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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.
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,
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authorized under those laws to exercise corporate trust powers, having a
combined capital and surplus of at least US$50,000,000, as set forth in its
most recent published annual report of condition, and subject to supervision or
examination by federal, state or District of Columbia authority. The note
trustee may also, if permitted by the SEC, be organized under the laws of a
jurisdiction other than the United States, provided that it is authorized under
such laws to exercise corporate trust powers and is subject to examination by
authority of such jurisdictions substantially equivalent to the supervision or
examination applicable to a trustee in the United States.
The note trustee may resign after giving three months' written notice to
the issuer trustee, the trust manager, the security trustee and each rating
agency. The issuer trustee may also remove the note trustee in the following
circumstances:
o if the note trustee becomes insolvent;
o if the note trustee ceases its business;
o if the note trustee fails to comply with any of its obligations under
any transaction document and the issuer trustee determines that this
failure has had, or if continued, will have, a Material Adverse Effect,
and if capable of remedy, the note trustee does not remedy this failure
within 14 days after the earlier of the following:
o the note trustee becoming aware of this failure; and
o receipt by the note trustee of written notice with respect to this
failure from either the issuer trustee or the trust manager; or
o if the note trustee fails to satisfy any obligation imposed on it under
the United States Trust Indenture Act of 1939 with respect to the trust
or the note trust deed.
Holders of 75% of the aggregate outstanding Principal Amount of the
US$ notes may require the issuer trustee to remove the note trustee.
Any resignation or removal of the note trustee and appointment of a
successor note trustee will not become effective until acceptance of the
appointment by a successor note trustee.
NOTE TRUSTEE'S ANNUAL REPORT
To the extent required by the United States Trust Indenture Act of 1939,
as amended, the note trustee will mail each year to all US$ noteholders a
report concerning:
o its eligibility and qualifications to continue as trustee under the note
trust deed;
o any amounts advanced by it under the note trust deed;
o the amount, interest rate and maturity date of indebtedness owing by the
issuer trustee to it in the note trustee's individual capacity;
o the property and funds physically held by it as note trustee;
o any release or release and substitution of collateral subject to the
lien of the security trust deed that has not previously been reported;
and
o any action taken by it that materially affects the US$ notes and that
has not previously been reported.
LIST OF NOTEHOLDERS
Three or more holders of US$ notes, each of whom has owned a US$ note for
at least six months, may, upon written request to the note trustee, obtain
access to the current list of US$ noteholders of the issuer trustee for
purposes of communicating with other US$ noteholders 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.
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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.
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:
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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;
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:
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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.
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$10,000 or
its equivalent, but not part thereof, of the Secured Monies that he holds or in
respect of which he is a representative.
A resolution of all the Voting Mortgagees, including an Extraordinary
Resolution, may be passed, without any meeting or previous notice being
required, by an instrument or notes in writing which have been signed by all of
the Voting Mortgagees.
ENFORCEMENT OF THE CHARGE
At any time after an event of default occurs, a resolution passed at a
duly convened meeting by a majority consisting of not less than 75% of the
votes capable of being cast by Voting Mortgagees present in person or by proxy
or a written resolution signed by all of the Voting Mortgagees may direct the
security trustee to do any or all of the following:
o declare the charge to be enforceable;
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o declare all Secured Monies immediately due and payable;
o convert the floating charge to a fixed charge over any or all of the
trust assets; or
o appoint a receiver over the trust assets or itself exercise the powers
that a receiver would otherwise have under the security trust deed.
If the Noteholder Mortgagees are the only Voting Mortgagees, they may
direct the security trustee to do any act which the security trustee is
required to do, or may only do, at the direction of an Extraordinary Resolution
of Voting Mortgagees, including enforcing the charge.
THE NOTE TRUSTEE AS VOTING MORTGAGEE
If an event of default under the security trust deed occurs and is
continuing, the issuer trustee and the trust manager will promptly notify the
note trustee of such an occurrence and the note trustee shall deliver to each
US$ 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;
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
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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.
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
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within 30 days after notice, the retiring security trustee may on behalf of the
Mortgagees appoint a successor security trustee, other than the trust manager
or its affiliates.
AMENDMENT
The issuer trustee and the security trustee may, following written notice
to each rating agency and with the written approval of the trust manager and
the note trustee, amend the security trust deed to, among other things, correct
a manifest error or ambiguity or which in the opinion of the security trustee
is necessary to comply with the provisions of any law or regulation. If the
amendment is prejudicial or likely to be prejudicial to the interests of the
Mortgagees or a class of Mortgagees, an Extraordinary Resolution of the Voting
Mortgagees or that class of Voting Mortgagees is required.
THE CHECK ACCOUNT AND DIRECT PAPERLESS ENTRY FACILITIES AGREEMENT
The servicer has arranged for National Australia Bank Limited to provide
borrowers with an option to utilise a check account and direct entry paperless
facility which provides borrowers with an expanded range of financial services
that are directly linked to the borrower's mortgage loan account. The provision
of these facilities has been documented in a check deposit and direct paperless
entry facilities agreement between National Australia Bank Limited, the
servicer and the issuer trustee known as the NBFI AGREEMENT.
The facilities under the NBFI Agreement are being provided to both:
o borrowers in relation to the trust; and
o borrowers under other Interstar mortgage backed securities programs
which are funded by various warehouse funding trusts, other Interstar
Millennium Trusts and other trusts which issue mortgage backed
securities. Perpetual Trustees Victoria Limited is the trustee of each of
these other trusts.
Under the terms of the NBFI Agreement, the servicer is responsible for the
day to day verification and processing of checks and direct entry paperless
facilities. In providing these facilities to borrowers, there is a possibility
that the servicer may:
o process and authorize the issuer trustee to pay forged or fraudulently
drawn checks or entries;
o fail to comply with stop payment notices made by borrowers; or
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:
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o in accordance with the investment management agreement;
o to the highest standard of accepted servicing practice of prudent
mortgage lending and investment management institutions;
o exercising a high degree of skill and care in respect thereof; and
o in compliance with all relevant legislation.
In performing any services under the investment management agreement the
servicer shall take into account whether its performance of such services may
adversely affect the rating of any notes. The servicer is entitled to delegate
its duties under the investment management agreement. The servicer at all times
remains liable for servicing the housing loans and the acts or omissions of any
delegate.
POWERS
The servicer has the express power, among other things:
o to waive any fees which may be collected in the ordinary course of
servicing the housing loans or arrange the rescheduling of interest due
and unpaid following a default under any housing loans;
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;
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
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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.
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
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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.
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.
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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.
95
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,
PORTFOLIO AT: 1998 1999 1999
- --------------------- ---------------------- ---------------------- ----------------------
Outstanding
Balance ............ $ 1,258,820,846.88 $ 1,500,609,532.07 $ 1,968,607,661.73
Number of Loans
Outstanding ........ 9,440 11,328 14,498
Percentage of
Delinquent
Loans* .............
31 -- 60 Days ....... 0.40% 0.55% 0.54%
60 -- 90 Days ....... 0.23% 0.38% 0.31%
91 Days Plus ........ 0.17% 0.18% 0.15%
Total
Delinquencies
over 30 Days ....... 0.80% 1.11% 1.00%
MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30,
PORTFOLIO AT: 2000 2000 2001 2001
- --------------------- ---------------------- ---------------------- ---------------------- ----------------------
Outstanding
Balance ............ $ 2,609,611,105.11 $ 3,344,250,484.60 $ 4,020,835,770.89 $ 4,820,490,560.20
Number of Loans
Outstanding ........ 18,579 23,091 27,406 32,114
Percentage of
Delinquent
Loans* .............
31 -- 60 Days ....... 0.43% 0.35% 0.33% 0.28%
60 -- 90 Days ....... 0.24% 0.16% 0.14% 0.12%
91 Days Plus ........ 0.13% 0.10% 0.06% 0.06%
Total
Delinquencies
over 30 Days ....... 0.80% 0.61% 0.53% 0.46%
MARCH 31, SEPTEMBER 30, MARCH 31,
PORTFOLIO AT: 2002 2002 2003
- --------------------- ---------------------- ---------------------- ----------------------
Outstanding
Balance ............ $ 5,864,319,193.21 $ 7,436,170,410.31 $ 8,997,021,037.72
Number of Loans
Outstanding ........ 38,113 46,825 56,322
Percentage of
Delinquent
Loans* .............
31 -- 60 Days ....... 0.40% 0.58% 0.40%
60 -- 90 Days ....... 0.19% 0.18% 0.17%
91 Days Plus ........ 0.10% 0.12% 0.15%
Total
Delinquencies
over 30 Days ....... 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, SEPTEMBER 30, MARCH 31,
SIX MONTH PERIOD ENDING: 2000 2001 2001 2002 2002 2003
- ------------------------------------------- --------------- ----------- --------------- ----------- --------------- ----------
Loan Losses as a % of Total Outstanding
Balance** ................................ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- -------
* Totals may not sum exactly due to rounding
** Net loss after any claim under Mortgage Insurance
There can be no assurance that the delinquency and foreclosure experience
with respect to the housing loans comprising the housing loan pool will
correspond to the delinquency and foreclosure experience of the servicer's
mortgage portfolio set forth in the foregoing table. Indeed, the statistics
shown in the preceding table represent the delinquency and foreclosure
experience for the total residential mortgage portfolios for each of the years
presented, whereas the aggregate delinquency and foreclosure experience on the
housing loans will depend on the results obtained over the life of the housing
loan pool. In addition, the foregoing statistics include housing loans with a
variety of payment and other characteristics that may not correspond to those
of the housing loans in the pool. Moreover, if the real estate market should
experience an overall decline in property values such that the principal
balances of the housing loans comprising the housing loan pool become equal to
or greater than the value of the related mortgaged properties, the actual rates
of delinquencies and foreclosures could be significantly higher than those
previously experienced by the servicer. In addition, adverse economic
conditions, which may or may not affect real property values, may affect the
timely payment by borrowers of scheduled payments of principal and interest on
the housing loans and, accordingly, the rates of delinquencies, foreclosures,
bankruptcies and losses with respect to the housing loan pool.
96
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 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.
97
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;
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
98
of the outstanding Principal Amount of the Class A3 notes, 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.
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.
99
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
100
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
101
USE OF PROCEEDS
The proceeds from the issue of the US$ notes, after being exchanged
pursuant to the currency swaps, will amount to A$1,024,320,458.00. 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.
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
102
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
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.
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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 becomes the absolute owner of the
property, a remedy that is, because of procedural constraints, rarely
used. If the mortgagee forecloses on the property, it loses the right to
sue the borrower under the personal covenant to repay and can only look
to the value of the property for satisfaction of the debt.
o The mortgagee may appoint a receiver to deal with income from the
property or exercise other rights delegated to the receiver by the
mortgagee. A receiver is the agent of the mortgagor and so, unlike when
the mortgagee enters possession of property, in theory the mortgagee is
not liable for the receiver's acts or as occupier of the property. In
practice, however, the receiver will require indemnities from the
mortgagee that appoints it.
o The mortgagee may sell the property, subject to various duties to ensure
that the mortgagee exercises proper care in relation to the sale. This
power of sale is usually expressly contained in the mortgage documents,
and is also implied in registered mortgages under the relevant Torrens
title legislation. The Torrens title legislation prescribes certain forms
and periods of notice to be given to the mortgagor prior to enforcement.
A sale under a mortgage may be by public auction or private treaty. Once
registered, the purchaser of property sold pursuant to a mortgagee's
power of sale becomes the absolute owner of the property.
A mortgagee's ability to call in all amounts under a housing loan or
enforce a mortgage which is subject to the Consumer Credit Legislation is
limited by various demand and notice procedures which are required to be
followed. For example, as a general rule enforcement cannot occur unless the
relevant default is not remedied within 30 days after a default notice is
given. Borrowers may also be entitled to initiate negotiations with the
mortgagee for a postponement of enforcement proceedings.
PENALTIES AND PROHIBITED FEES
Australian courts will not enforce an obligation of a borrower to pay
default interest on delinquent payments if the court determines that the
relevant default interest rate is a penalty. Certain jurisdictions prescribe a
maximum recoverable interest rate, although in most jurisdictions there is no
specified threshold rate to determine what is a penalty. In those
circumstances, whether a rate is a penalty or not will be determined by
reference to such factors as the prevailing market interest rates. The Consumer
Credit Legislation does not impose a limit on the rate of default interest, but
a rate which is too high may entitle the borrower to have the loan agreement
re-opened on the ground that it is unjust. Under the Corporations Act 2001 of
Australia, the liquidator of a company may avoid a loan under which an
extortionate interest rate is levied.
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The Consumer Credit Legislation requires that any fee or charge to be
levied by the lender must be provided for in the contract, otherwise it cannot
be levied. The regulations under the Consumer Credit Legislation may also from
time to time prohibit certain fees and charges. The Consumer Credit Legislation
also requires that establishment fees, termination fees and prepayment fees
must be reasonable otherwise they may be reduced or set aside.
BANKRUPTCY
The insolvency of a natural person is governed by the provisions of the
Bankruptcy Act 1966 of Australia, which is a federal statute. Generally,
secured creditors of a natural person, such as mortgagees under real property
mortgages, stand outside the bankruptcy. That is, the property of the bankrupt
which is available for distribution by the trustee in bankruptcy does not
include the secured property. The secured creditor may, if it wishes, prove, or
file a claim, in the bankruptcy proceeding as an unsecured creditor in a number
of circumstances, including if they have realized the related mortgaged
property and their debt has not been fully repaid, in which case they can prove
for the unpaid balance. Certain dispositions of property by a bankrupt may be
avoided by the trustee in bankruptcy. These include where:
o the disposition was made to defraud creditors; or
o the disposition was made by an insolvent debtor within 6 months of the
petition for bankruptcy and that disposition gave a preference to an
existing creditor over at least one other creditor.
The insolvency of a company is governed by the Corporations Act 2001 of
Australia. Again, secured creditors generally stand outside the insolvency.
However, a liquidator may avoid a mortgage which is voidable under the
Corporations Act because it is an uncommercial transaction, or an unfair
preference to a creditor or a transaction for the purpose of defeating
creditors, and that transaction occurred:
o when the company was insolvent, or an act is done to give effect to the
transaction when the company is insolvent, or the company becomes
insolvent because of the transaction or the doing of an act to give
effect to the transaction; and
o within a prescribed period prior to the commencement of the winding up
of the company.
ENVIRONMENTAL
Real property which is mortgaged to a lender may be subject to unforeseen
environmental problems, including land contamination. Environmental legislation
which deals with liability for such problems exists at both State and Federal
levels, although the majority of relevant legislation is imposed by the States.
No Australian statute expressly imposes liability on "passive" lenders or
security holders for environmental matters, and some states expressly exclude
such liability. However, liability in respect of environmentally damaged land,
which liability may include the cost of rectifying the damage, may attach to a
person who is, for instance, an owner, occupier or person in control of the
relevant property. In some but not all States, lenders are expressly excluded
from the definitions of one or more of these categories.
Merely holding security over property will not convert a lender into an
occupier. However, a lender or receiver who takes possession of contaminated
mortgaged property or otherwise enforces its security may be liable as an
occupier.
Some environmental legislation provides that security interests may be
created over contaminated or other affected property to secure payment of the
costs of any necessary rectification of the property. The security interests
may have priority over pre-existing mortgages. To the extent that the issuer
trustee or a receiver appointed on its behalf incurs any such liabilities, it
will be entitled to be indemnified out of the assets of the trust.
INSOLVENCY CONSIDERATIONS
The current transaction is designed to mitigate insolvency risk. For
example, the assignment of the beneficial interest of the seller in the housing
loans to the issuer trustee should ensure that the housing
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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 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, 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.
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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 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
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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.
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,
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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;
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.
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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.
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
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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.
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
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
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will primarily be the interest income that is derived by the trust from the
provision of mortgage finance. Subject to certain exceptions, the allowable
deductions of the trust will primarily be the expenses which are incurred for
the purpose of deriving assessable income or necessarily incurred in carrying
on a business for the purpose of gaining or producing assessable income.
Expenses which are capital in nature will not be allowable as deductions.
Under the current taxation law, the net income of the trust is to be
included in the assessable income of the beneficiaries of the trust who are
presently entitled to the income. This will be so whether or not the income is
actually paid to the unitholder, where the unitholder is presently entitled to
the net income of the trust. Where the net income is paid to a unitholder, it
will be assessable to the unitholder in the year to which the distribution
relates notwithstanding that it may be paid in the following year of income.
In the case of the trust, the residual income unit is held by Interstar
Securities (Australia) Pty Ltd who will be presently entitled to the net income
of the trust. The trust itself will not currently be liable to income tax on
the net income derived by the trust.
TAX REFORM PROPOSALS
TAXATION OF TRUSTS AS COMPANIES
Under the Review of Business Taxation recommendations it was proposed that
some trusts be taxed as if they were companies as from July 1, 2001. The
Australian federal government released draft legislation to implement these
recommendations. The draft legislation provided that non-fixed trusts would be
taxed as if they were companies. Fixed trusts, however, would not be subject to
the proposed measures and would therefore retain their current taxation
treatment and accordingly will continue to receive flow-through treatment. The
Exposure Draft Legislation was subject to an extensive consultation process. As
a result of this process, the Australian federal government resolved that the
Exposure Draft Legislation involved numerous complications, therefore it has
since been withdrawn.
The Australian federal government may issue new draft rules in relation to
the taxation of trusts in the future, however the form and proposed start date
of these measures remain uncertain.
In any case, the measures should in no way impact the payment to
noteholders who will continue to receive their interest payments in respect of
the notes issued by the issuer trust.
TAX CONSOLIDATION
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.
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 previous Iraqi regime, including Saddam
Hussein, other members of the regime and their immediate families, individuals
associated with the regime of former President of
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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 REGULATION), the assets of the trust would be treated as plan assets of a
Benefit Plan for the purposes of ERISA and Section 4975 of the Code only if the
Benefit Plan acquires an "equity interest" in the trust and none of the
exceptions contained in the regulation is applicable. An equity interest is
defined under the regulation as an interest in an entity other than an
instrument which is treated as indebtedness under applicable local law and which
has no substantial equity features. The US$ notes are subject to a principal
charge-off feature, as described herein, under which the principal amount of a
US$ note may be reduced if the Aggregate Principal Loss Amount exceeds the
amount allocated or available for allocation on that payment date under the
second bullet point under the heading "--Additional Income Payments". There is
no specific guidance in the Regulation regarding whether a principal charge-off
feature under the circumstances described herein would constitute a "substantial
equity feature", although the Regulation does state that an instrument will not
fail to be treated as indebtedness merely because it has certain equity
features, such as additional variable interest or conversion rights, that are
incidental to the instrument's primary fixed obligation. 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 purposes of the Regulation, 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";
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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 either (a) you are not acquiring a US$ note with the assets of a
Benefit Plan or (b) your purchase and holding of the note will not result in a
non-exempt prohibited transaction under Section 406(a) of ERISA or Section 4975
of the Code.
Employee benefit plans that are governmental plans, as defined in Section
3(32) of ERISA, and certain church plans, as defined in Section 3(33) of ERISA,
are not subject to ERISA requirements; however, governmental plans may be
subject to comparable state law restrictions.
If you are a plan fiduciary considering the purchase of any of the
US$ notes, you should consult your tax and legal advisors regarding whether the
assets of the Trust would be considered plan assets, the possibility of
exemptive relief from the prohibited transaction rules and other issues and
their potential consequences.
LEGAL INVESTMENT CONSIDERATIONS
The US$ notes will not constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984, because the
originator of the housing loans was not subject to United States state or
federal regulatory authority. Accordingly, some United States institutions with
legal authority to invest in comparably rated securities based on such housing
loans may not be legally authorized to invest in the US$ notes. No
representation is made as to whether the notes constitute legal investments
under any applicable statute, law, rule, regulation or order for any entity
whose investment activities are subject to investment laws and regulations or
to review by any regulatory authorities. You are urged to consult with your
counsel concerning the status of the US$ notes as legal investments for you.
AVAILABLE INFORMATION
Interstar Securitisation Management Pty Limited, as trust manager, has
filed with the SEC a registration statement under the United States Securities
Act of 1933 (SECURITIES ACT) with respect to the US$ notes offered pursuant to
this prospectus. For further information, reference should be made to the
registration statement and amendments thereof and to the exhibits thereto,
which are available for inspection without charge at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. 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 and the Class A3 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
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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.
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. ................ $337,500,000
J.P. Morgan Securities Inc.. ......... $337,500,000
Total ................................ $675,000,000
PRINCIPAL AMOUNT OF
CLASS B1 NOTES
UNDERWRITERS OF THE CLASS B1 NOTES (US$)
- -------------------------------------- --------------------
Barclays Capital Inc. ................ $20,500,000
J.P. Morgan Securities Inc.. ......... $20,500,000
Total ................................ $41,000,000
The underwriting agreement provides that the underwriters are obligated to
purchase all of the US$ 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 ......... 0.084% .0208%
Class B1 notes ......... 0.084% .0208%
The trust manager estimates that the out-of-pocket expenses for this
offering will be approximately US$854,952.50.
The trust manager has agreed to indemnify the underwriters against civil
liabilities under the Securities Act, or contribute to payments which the
underwriters may be required to make in that respect.
The total underwriting discounts and commissions for the US$ notes will be
equal to US$1,002,400. The underwriting discounts and commissions will be paid
separately by Interstar Securities (Australia) Pty Limited and not from the
proceeds of the issuance of the US$ notes.
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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 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;
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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 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.
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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 October 22, 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 017896636 and ISIN
US46071MAA62 for the Class A2 notes and Common Code number 017896741 and ISIN
US46071MAB46 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. Orrick, Herrington & Sutcliffe, London,
United Kingdom will act as United States legal counsel to the underwriters.
122
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;
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 teach 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
123
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
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 65.
CHARGE-OFF.................... see page 65.
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
124
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 the Step-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
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.
125
CODE.......................... see page 107.
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.
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;
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
126
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;
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
127
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 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;
128
o cash and/or deposits with an Approved Bank,
or the acquisition of certificates of
deposit or any other debt security issued
by a bank which has a short term rating of
A-1+ from S&P and P-1 from Moody's which is
approved by the trust manager in writing;
o loan securities issued, secured or
guaranteed by the Government of Australia
or any State or Territory within the
Commonwealth of Australia; and
o any other Authorized Investments approved
by the rating agencies.
LIQUIDATION LOSSES............ means, with respect to any housing loan that
becomes a liquidated loan during a Collection
Period, the Unpaid Balance of that liquidated
loan, after the application of all Liquidation
Proceeds relating to that liquidated loan,
including any enforcement expenses in respect
of that liquidated loan.
LIQUIDATION PROCEEDS.......... means, in relation to a housing loan, the
amount received by or on behalf of the issuer
trustee in connection with the liquidation of
such housing loan including, without
limitation:
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 65.
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 83.
129
NOTEHOLDER MORTGAGEES......... means the Class A1 noteholders, the Class A3
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.
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 91.
STEP-UP MARGIN DATE........... means the payment date falling in October
2008.
TAX ACT....................... see page 111.
TERMINATION DATE.............. with respect to the trust shall be the
earlier to occur of:
o the date which is 80 years after the date
of creation of the trust;
o the termination of the trust under statute
or general law;
o full and final enforcement by the security
trustee of its rights under the security
trust deed after the occurrence of an event
of default under the security trust deed;
or
o at any time after all creditors of the
trust have been repaid in full, the
business day immediately following that
date.
130
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
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 85.
131
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INTERSTAR MILLENNIUM SERIES 2003-5G TRUST
CLASS A2 MORTGAGE BACKED FLOATING RATE NOTES
CLASS B1 MORTGAGE BACKED FLOATING RATE NOTES
-------------------------------
PROSPECTUS
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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 January 19, 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.
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