The attached Prospectus dated July 11, 2002 (the "Prospectus") relating
to the US$1,000,000,000 Class A2 Mortgage Backed Floating Rate Notes (the
"Securities") issued by Interstar Millenium Series 2002-1G Trust (the "Issuer")
was originally filed on July 15, 2002 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.
FILED PURSUANT TO RULE 424(b)(4)
REGISTRATION NO.333-90190
US$1,000,000,000
INTERSTAR MILLENNIUM SERIES 2002-1G TRUST
CLASS A2 MORTGAGE BACKED FLOATING RATE NOTES
INTERSTAR(TM)
INTERSTAR SECURITISATION MANAGEMENT PTY LIMITED
(ACN 100 346 898)
TRUST MANAGER
PERPETUAL TRUSTEES VICTORIA LIMITED (ABN 47 004 027 258)
ISSUER TRUSTEE
The Class A2 notes will be collateralized by a pool of housing loans
secured by properties located in Australia. The Interstar Millennium Series
2002-1G Trust will be governed by the laws of New South Wales, Australia.
The Class A2 notes are not deposits and neither the Class A2 notes nor the
underlying housing loans are insured or guaranteed by any governmental agency
or instrumentality. The Class A2 notes represent obligations of Perpetual
Trustees Victoria Limited solely in its capacity as trustee of the Interstar
Millennium Series 2002-1G Trust and do not represent obligations of, or
interests in, Interstar Securitisation Management Pty Limited or Perpetual
Trustees Victoria Limited in any other capacity, and are not guaranteed by
Interstar Securitisation Management Pty Limited or Perpetual Trustees Victoria
Limited.
INVESTING IN THE NOTES INVOLVES RISKS - SEE "RISK FACTORS" ON PAGE 14.
INITIAL UNDERWRITNG
PRINCIPAL INITIAL PRICE TO DISCOUNTS AND PROCEEDS TO
BALANCE INTEREST RATE PUBLIC COMMISSIONS* ISSUER TRUSTEE*
------------------ --------------- -------------------------- ------------------------ -------------------------
Class A2 notes US$1,000,000,000 LIBOR+0.18% US$1,000,000,000 or 100% US$1,650,000 or 0.165% US$1,000,000,000 or 100%
Applications have been made to have the Class A2 notes listed on the
Luxembourg Stock Exchange and the Australian Stock Exchange.
Delivery of the Class A2 notes in book-entry form through The Depository
Trust Company, Clearstream, Luxembourg and the Euroclear System will be made on
or about July 17, 2002.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Class A2 notes or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
BARCLAYS CAPITAL
JPMORGAN MACQUARIE BANK
LONDON BRANCH
The date of this prospectus is July 11, 2002
- --------------------------------------------------------------------------------
* The underwriting discounts and commissions will be paid separately by
Interstar Securities (Australia) Pty Limited and not from the proceeds to
the issuer trustee.
TABLE OF CONTENTS
PAGE
-----
Disclaimers with Respect to Sales to Non-U.S. Investors ................ v
Australian Disclaimers ................................................. vii
Summary ................................................................ 1
Parties to the Transaction .......................................... 1
Structural Diagram .................................................. 3
Summary of the Notes ................................................ 4
Structural Overview ................................................. 5
Credit Enhancements ................................................. 5
Subordination ....................................................... 5
Mortgage Insurance Policies ......................................... 6
Title Insurance Policies ............................................ 6
Liquidity Enhancement ............................................... 6
Redraws ............................................................. 6
Hedging Arrangements ................................................ 7
Optional Redemption ................................................. 7
Prefunding .......................................................... 8
The Housing Loan Pool ............................................... 9
Withholding Tax ..................................................... 10
U.S. Tax Status ..................................................... 10
Australian Tax Status ............................................... 10
Legal Investment .................................................... 10
ERISA Considerations ................................................ 10
Book-Entry Registration ............................................. 10
Collections ......................................................... 10
Interest on the Notes ............................................... 11
Principal on the Notes .............................................. 11
Allocation of Cash Flows ............................................ 11
Distribution of Available Income on Each Monthly Payment Date .......... 12
Distribution of Mortgage Principal Repayments and Surplus Liquidity on
Each Monthly Payment Date ........................................... 13
Risk Factors ........................................................... 14
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 Sellers ......................................................... 27
The Backup Servicers ................................................ 28
Description of the Trust ............................................... 29
Interstar Millennium Trusts Securitization Program .................. 29
Interstar Millennium Series 2002-1G 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
i
PAGE
-----
Breach of Representations and Warranties ................................. 34
Other Features of the Housing Loans ...................................... 34
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 Geographic 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 Indemnity Limited ........ 40
Housing Loans by Mortgage Insurer and LVR - Royal & Sun Alliance LMI ..... 41
Housing Loans by Mortgage Insurer and LVR - GE Capital Mortgage Insurance
Corporation (Australia) Pty Ltd ......................................... 41
Housing Loans by Mortgage Insurer and LVR - PMI Mortgage Insurance Ltd ... 42
Housing Loans by Mortgage Insurer and LVR - Commonwealth Of Australia .... 42
Housing Loans by Current Coupon Rates .................................... 43
Housing Loans by Months Remaining to Maturity ............................ 43
Interstar Residential Loan Program .......................................... 44
Origination Process ...................................................... 44
Approval and Underwriting Process ........................................ 44
General Features of the Housing Loans .................................... 46
Special Features of the Housing Loans .................................... 46
Additional Features of the Housing Loans ................................. 47
The Mortgage Insurance Policies ............................................. 48
General .................................................................. 48
Certain Provisions of Mortgage Insurance Policies ........................ 48
Description of the Mortgage Insurers ..................................... 49
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 Class A2 Notes ........................................... 54
General .................................................................. 54
Form of the Class A2 notes ............................................... 54
Distributions on the Notes ............................................... 57
Key Dates and Periods .................................................... 58
Calculation of Income .................................................... 59
Income ................................................................... 59
Application of Capital and Liquid Authorized Investments to Available
Income ................................................................. 59
Distribution of Available Income ......................................... 60
Additional Income Payments .............................................. 61
Interest on the Notes .................................................... 62
ii
PAGE
-----
Mortgage Principal Repayments ......................................... 62
Principal Distributions ............................................... 63
Payments Into US$ Account.............................................. 64
Payments Out of US$ Account............................................ 64
Notices ............................................................... 64
The Fixed-Floating Rate Swap .......................................... 64
The Currency Swap and Currency Swap Guarantee ......................... 66
Currency Swap Provider ................................................ 69
Currency Swap Guarantor ............................................... 70
Swap Collateral Account ............................................... 71
Withholding or Tax Deductions ......................................... 71
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 ..................................... 75
Description of the Transaction Documents ................................. 76
Trust Accounts ........................................................ 76
Modifications ......................................................... 76
The Issuer Trustee .................................................... 77
The Trust Manager ..................................................... 79
The Note Trustee ...................................................... 80
Note Trustee's Annual Report .......................................... 81
List of Noteholders ................................................... 82
Reports ............................................................... 82
The Security Trust Deed ............................................... 82
The Check Account and Direct Paperless Entry Facilities Agreement ..... 88
The Investment Management Agreement ................................... 88
The Backup Servicer Agreements ........................................ 91
The Servicer ............................................................. 93
Servicing of Housing Loans ............................................ 93
Collection and Enforcement Procedures ................................. 93
Collection and Foreclosure Process .................................... 93
Servicer Delinquency Experience ....................................... 95
Prepayment and Yield Considerations ...................................... 96
General ............................................................... 96
Prepayments ........................................................... 96
Weighted Average Lives ................................................ 97
Use of Proceeds .......................................................... 100
Legal Aspects of the Housing Loans ....................................... 100
General ............................................................... 100
Nature of Housing Loans as Security ................................... 100
Strata Title .......................................................... 100
Urban Leasehold ....................................................... 101
Taking Security Over Land ............................................. 101
Enforcement of Registered Mortgages ................................... 102
iii
PAGE
-----
Penalties and Prohibited Fees ................................. 102
Bankruptcy .................................................... 103
Environmental ................................................. 103
Insolvency Considerations ..................................... 104
Tax Treatment of Interest on Australian Housing Loans ......... 104
Consumer Credit Legislation ................................... 104
United States Federal Income Tax Matters ......................... 105
Overview ...................................................... 105
General ....................................................... 106
Sale of Notes ................................................. 106
Market Discount ............................................... 106
Premium ....................................................... 107
Backup Withholding ............................................ 107
Australian Tax Matters ........................................... 108
Payments of Principal, Premiums and Interest .................. 108
Note Transfers ................................................ 108
Profit on Sale ................................................ 109
Goods and Services Tax ........................................ 109
Other Taxes ................................................... 110
Tax Reform Proposals .......................................... 110
Debt & Equity ................................................. 111
Enforcement of Foreign Judgments in Australia .................... 111
Exchange Controls and Limitations ................................ 112
ERISA Considerations ............................................. 112
Legal Investment Considerations .................................. 113
Available Information ............................................ 113
Ratings of the Notes ............................................. 114
Plan of Distribution ............................................. 114
Underwriting .................................................. 114
Offering Restrictions ......................................... 115
General Information .............................................. 118
Listing ....................................................... 118
Authorization ................................................. 118
Litigation .................................................... 118
Euroclear and Clearstream, Luxembourg ......................... 118
Transaction Documents Available ............................... 118
Announcement ..................................................... 119
Legal Matters .................................................... 119
Directory ........................................................ 120
Glossary ......................................................... 121
iv
DISCLAIMERS WITH RESPECT TO SALES TO NON-U.S. INVESTORS
This section applies only to the offering of the Class A2 notes in
countries other than the United States of America. In this section, references
to Perpetual Trustees Victoria Limited are to that company only in its capacity
as trustee of the Interstar Millennium Series 2002-1G Trust, and not its
personal capacity or as trustee of any other trust. Perpetual Trustees Victoria
Limited is not responsible or liable for this prospectus in any capacity.
Interstar Securitisation Management Pty Limited is solely responsible for this
prospectus. Interstar Securitisation Management Pty Limited, as trust manager,
has taken all reasonable care to ensure that the information contained in this
prospectus is true and accurate in all material respects and that in relation
to this prospectus there are no material facts the omission of which would make
misleading any statement herein, whether fact or opinion.
Other than in the United States of America, no person has taken or will
take any action that would permit a public offer of the Class A2 notes in any
country or jurisdiction. The Class A2 notes may be offered non-publicly in
other jurisdictions. The Class A2 notes may not be offered or sold, directly or
indirectly, and neither this prospectus nor any form of application,
advertisement or other offering material may be issued, distributed or
published in any country or jurisdiction, unless permitted under all applicable
laws and regulations. The underwriters have represented that all offers and
sales by them have been in compliance, and will comply, with all applicable
restrictions on offers and sales of the Class A2 notes. You should inform
yourself about and observe any of these restrictions. For a description of
further restrictions on offers and sales of the Class A2 notes, see "Plan of
Distribution".
This prospectus does not and is not intended to constitute an offer to
sell or a solicitation of any offer to buy any of the Class A2 notes by or on
behalf of Perpetual Trustees Victoria Limited in any jurisdiction in which the
offer or solicitation is not authorized or in which the person making the offer
or solicitation is not qualified to do so or to any person to whom it is
unlawful to make an offer or solicitation in such jurisdiction.
None of Perpetual Trustees Victoria Limited, in its personal capacity and
as issuer trustee, Perpetual Trustee Company Limited, as security trustee,
Interstar Securities (Australia) Pty Limited, as servicer, The Bank of New
York, New York branch, as note trustee, principal paying agent and calculation
agent, The Bank of New York (Luxembourg) S.A., as Luxembourg paying agent and
Luxembourg transfer agent, the underwriters, National Australia Bank Limited,
as fixed-floating rate swap provider, Zurich Capital Markets Australia Limited,
as currency swap provider, ZCM Matched Funding Corp., as currency swap
guarantor or PMI Mortgage Insurance Ltd, GE Capital Mortgage Insurance
Corporation (Australia) Pty Ltd, PMI Indemnity Limited, Royal & Sun Alliance
Lenders Mortgage Insurance Limited or the Commonwealth of Australia as mortgage
insurers accept any responsibility for any information contained in this
prospectus and none of them has separately verified the information contained
in this prospectus or makes any representation, warranty or undertaking,
express or implied, as to the accuracy or completeness of any information
contained in this prospectus or any other information supplied in connection
with the Class A2 notes.
Perpetual Trustees Victoria Limited, in its personal capacity and as
issuer trustee, Interstar Securitisation Management Pty Limited, as trust
manager, Interstar Securities (Australia) Pty Limited as servicer, Perpetual
Trustee Company Limited, as security trustee, The Bank of New York, New York
branch, as note trustee, principal paying agent and calculation agent, The Bank
of New York (Luxembourg) S.A., as Luxembourg paying agent and Luxembourg
transfer agent, National Australia Bank Limited, as fixed-floating rate swap
provider, Zurich Capital Markets Australia Limited, as currency swap provider,
ZCM Matched Funding Corp., as currency swap guarantor, PMI Mortgage Insurance
Ltd, GE Capital Mortgage Insurance Corporation (Australia) Pty Ltd, PMI
Indemnity Limited, Royal & Sun Alliance Lenders Mortgage Insurance Limited or
the Commonwealth of Australia as mortgage insurers and the underwriters do not
recommend that any person should purchase any of the Class A2 notes and do not
accept any responsibility or make any representation as to the tax consequences
of investing in the Class A2 notes.
Each person receiving this prospectus acknowledges that he or she has not
relied on the entities listed in the preceding paragraph nor on any person
affiliated with any of them in connection with his
v
or her investigation of the accuracy of the information in this prospectus or
his or her investment decisions; acknowledges that this prospectus and any
other information supplied in connection with the Class A2 notes is not
intended to provide the basis of any credit or other evaluation; acknowledges
that the underwriters have expressly not undertaken to review the financial
condition or affairs of the trust or any party named in the prospectus during
the life of the Class A2 notes; should make his or her own independent
investigation of the trust and the Class A2 notes; and should seek its own tax,
accounting and legal advice as to the consequences of investing in any of the
Class A2 notes.
No person has been authorized to give any information or to make any
representations other than those contained in this prospectus in connection
with the issue or sale of the Class A2 notes. If such information or
representation is given or received, it must not be relied upon as having been
authorized by Perpetual Trustees Victoria Limited or the underwriters.
Neither the delivery of this prospectus nor any sale made in connection
with this prospectus shall, under any circumstances, create any implication
that:
o there has been no material change in the affairs of the trust or any
party named in this prospectus since the date of this prospectus; or
o any other information supplied in connection with the Class A2 notes is
correct as of any time subsequent to the date on which it is supplied
or, if different, the date indicated in the document containing the
same.
Perpetual Trustees Victoria Limited's liability to make payments of
interest and principal on the notes is limited to its right of indemnity from
the assets of the trust. All claims against Perpetual Trustees Victoria Limited
in relation to the notes may only be satisfied out of the assets of the trust
and are limited in recourse to the assets of the trust.
This prospectus will be available free of charge at the office of The Bank
of New York (Luxembourg) S.A. located at Aerogolf Center, 1A, Hoehenhof, L1736,
Senningerberg, Luxembourg, during the period of fourteen days from the date of
this prospectus.
The Luxembourg Stock Exchange takes no responsibility for the contents of
this prospectus, makes no representation as to its accuracy or completeness and
expressly disclaims any liability whatsoever for any loss however arising from
or in reliance upon the whole or any part of the contents of this prospects.
None of the rating agencies have been involved in the preparation of this
prospectus.
THIS DOCUMENT MAY NOT BE COMMUNICATED IN THE UNITED KINGDOM OTHER THAN TO
PERSONS AUTHORIZED UNDER THE FINANCIAL SERVICES AND MARKETS ACT 2000 OR
OTHERWISE HAVING PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS AND
QUALIFYING AS INVESTMENT PROFESSIONALS UNDER ARTICLE 19, OR PERSONS QUALIFYING
AS HIGH NET WORTH PERSONS UNDER ARTICLE 49, OF THE FINANCIAL SERVICES AND
MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2001, AS AMENDED, NOR MAY ANY
NOTES BE OFFERED OR SOLD IN THE UNITED KINGDOM EXCEPT TO PERSONS WHOSE ORDINARY
ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING OR DISPOSING OF
INVESTMENTS, AS PRINCIPAL OR AGENT, FOR THE PURPOSES OF THEIR BUSINESS OR WHO
IT IS REASONABLE TO EXPECT WILL ACQUIRE, HOLD, MANAGE OR DISPOSE OF
INVESTMENTS, AS PRINCIPAL OR AGENT, FOR THE PURPOSES OF THEIR BUSINESS OR
OTHERWISE IN CIRCUMSTANCES THAT DO NOT RESULT IN AN OFFER TO THE PUBLIC WITHIN
THE MEANING OF THE PUBLIC OFFERS OF SECURITIES REGULATIONS 1995, AS AMENDED.
THIS DOCUMENTS IS NOT AVAILABLE TO OTHER CATEGORIES OF PERSONS IN THE UNITED
KINGDOM AND NO ONE FALLING OUTSIDE SUCH CATEGORIES IS ENTITLED TO RELY ON, AND
MUST NOT ACT ON, ANY INFORMATION IN THIS DOCUMENT. THE TRANSMISSION OF THIS
DOCUMENT TO ANY 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 and
calculation agent, The Bank of New York (Luxembourg) S.A., as Luxembourg
paying agent and Luxembourg transfer agent nor the underwriters in any
way stands behind the capital value or the performance of the notes or
the assets of the trust except to the limited extent provided in the
transaction documents and the swap agreements for the trust.
o None of Interstar Nominees (B) Pty Limited, Interstar Nominees (N) Pty
Limited or Interstar Nominees (R) Pty Limited in their individual
capacities and as sellers, Perpetual Trustees Victoria Limited,
Interstar Securitisation Management Pty Limited, as trust manager,
Interstar Securities (Australia) Pty Limited, as servicer, Perpetual
Trustee Company Limited, as security trustee, The Bank of New York, New
York branch, as note trustee, principal paying agent and calculation
agent, The Bank of New York (Luxembourg) S.A., as Luxembourg paying
agent and Luxembourg transfer agent, National Australia Bank Limited, as
fixed-floating rate swap provider, Zurich Capital Markets Australia
Limited, as currency swap provider, ZCM Matched Funding Corp., as
currency swap guarantor or 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
SUMMARY
This summary highlights selected information from this document and does
not contain all of the information that you need to consider in making your
investment decision. This summary contains an overview of some of the concepts
and other information to aid your understanding. All of the information
contained in this summary is qualified by the more detailed explanations in
other parts of this prospectus.
PARTIES TO THE TRANSACTION
TRUST....................... Interstar Millennium Series 2002-1G Trust
ISSUER TRUSTEE.............. Perpetual Trustees Victoria Limited (ABN 47 004
027 258), in its capacity as trustee of the trust
TRUST MANAGER............... Interstar Securitisation Management Pty Limited
(ACN 100 346 898), of Level 28, 367 Collins
Street, Melbourne, Victoria, 3000, telephone
(613) 9612-1111
NOTE TRUSTEE................ The Bank of New York, New York branch
SECURITY TRUSTEE............ Perpetual Trustee Company Limited (ABN 42 000
001 007)
SERVICER.................... Interstar Securities (Australia) Pty Limited
(ABN 72 087 271 109)
PRIMARY BACKUP SERVICER..... Zurich Capital Markets Australia Limited (ABN
99 095 545 887)
SECONDARY BACKUP SERVICER... KPMG Corporate Finance (Aust) Pty Limited (ABN
43 007 363 215)
SELLERS..................... Interstar Nominees (B) Pty Limited (ABN 15 075
329 412)
Interstar Nominees (N) Pty Limited (ABN 11 092
095 648)
Interstar Nominees (R) Pty Limited (ABN 57 092
315 716)
PRINCIPAL PAYING AGENT...... The Bank of New York, New York branch
LUXEMBOURG PAYING AGENT..... The Bank of New York (Luxembourg) S.A.
LUXEMBOURG TRANSFER AGENT... The Bank of New York (Luxembourg) S.A.
CALCULATION AGENT........... The Bank of New York, New York branch
RESIDUAL BENEFICIARY........ Interstar Securities (Australia) Pty Limited
UNDERWRITERS................ Barclays Capital Inc.
J.P. Morgan Securities Inc.
Macquarie Bank Limited
LUXEMBOURG LISTING AGENT.... The Bank of New York (Luxembourg) S.A.
1
MORTGAGE INSURERS........... PMI Indemnity Limited (ABN 49 000 781 171), PMI
Mortgage Insurance Ltd (ABN 70 000 511 071), GE
Capital Mortgage Insurance Corporation
(Australia) Pty Ltd (ABN 52 081 488 440), Royal &
Sun Alliance Lenders Mortgage Insurance Limited
(ABN 55 001 825 725) and the Commonwealth of
Australia
TITLE INSURER............... First American Title Insurance Company of
Australia Pty Limited (ABN 64 075 279 908)
FIXED-FLOATING RATE SWAP
PROVIDER .......... National Australia Bank Limited
(ABN 12 004 044 937) or any other acceptable
fixed-floating rate swap provider
CURRENCY SWAP PROVIDER...... Zurich Capital Markets Australia Limited
(ABN 99 095 545 887)
CURRENCY SWAP GUARANTOR..... ZCM Matched Funding Corp.
RATING AGENCIES............. Moody's and S&P
2
STRUCTURAL DIAGRAM
BORROWERS
SELLERS
Interstar Nominees (B) Pty Limited A$ Housing SECURITY TRUSTEE
Interstar Nominees (N) Pty Limited and Loan Payments Perpetual Trustee
Interstar Nominees (R) Pty Limited Company Limited
COLLECTIONS BANK First ranking floating charge over
National Australia the assets of the trust
Bank Limited
TRUST MANAGER MORTGAGE INSURERS
Interstar Securitisation Equitable PMI Indemnity Limited
Management Pty Limited assignment of PMI Mortgage Insurance Ltd
housing loans GE Capital Mortgage Insurance
Corporation (Australia) Pty Ltd
Royal & Sun Alliance Lenders
Mortgage Insurance Limited
Commonwealth of Australia
ISSUER TRUSTEE
PRIMARY BACKUP Perpetual Trustees Payments from Mortgage
SERVICER Victoria Limited Insurance Policies
Zurich Capital
Markets Australia SERVICER TITLE INSURER
Limited Interstar First American Title
Securities Interstar Millennium Series 2002- Insurance Company
(Australia) Pty 1G Trust of Australia Pty Limited
Limited Payments from
SECONDARY BACKUP The Title
SERVICER Insurance Policy
KPMG Corporate
Finance (Aust) Payments on the
Pty Limited Class A2 notes BENEFICIARY
Interstar Securities
(Australia) Pty Limited
CURRENCY SWAP PROVIDER
Zurich Capital Markets Australia
Limited
Payments on the
FIXED-FLOATING Class B notes
RATE SWAP PROVIDER
National Australia
Bank Limited
PRINCIPAL PAYING AGENT
The Bank of New York, CLASS B NOTEHOLDERS
New York branch
CURRENCY SWAP
GUARANTOR
ZCM Matched Funding Corp CLEARING SYSTEMS
The Depository Trust Company CLASS A2 NOTES
Euroclear/
Clearstream, Luxembourg
NOTE TRUSTEE
CLASS A2 NOTE OWNERS The Bank of New York,
New York branch
3
SUMMARY OF THE NOTES
The issuer trustee will also issue Class B notes and may issue Class A1
notes collateralized by the same pool of housing loans as the Class A2 notes.
The Class B notes and the Class A1 notes have not been and will not be
registered in the United States and are not being offered by this prospectus.
The term "notes" when used in this prospectus will mean the Class A notes,
being together the Class A1 notes and the Class A2 notes, and the Class B
notes.
- --------------------------------------------------------------------------------------------------------
CLASS A2 CLASS B
- --------------------------------------------------------------------------------------------------------
Aggregate Initial Principal US$1,000,000,000 A$135,000,000
Amount:
- --------------------------------------------------------------------------------------------------------
% of Total: 93.0% 7.0%
- --------------------------------------------------------------------------------------------------------
Anticipated Ratings:
Moody's Aaa Not rated
S&P AAA AA-
- --------------------------------------------------------------------------------------------------------
Interest rate from the closing date up three-month one-month Australian Bank
to but excluding the step-up margin LIBOR +0.18% Bill Rate plus a margin
date
- --------------------------------------------------------------------------------------------------------
Interest rate from and including the three-month one-month Australian Bank
step-up margin date LIBOR +0.54% Bill Rate plus a margin
- --------------------------------------------------------------------------------------------------------
Minimum Denominations: US$100,000 and thereafter, A$10,000 (with initial
minimum increments of minimum subscription of
US$1,000 A$500,000)
- --------------------------------------------------------------------------------------------------------
Interest Accrual Method: actual/360 actual/365
- --------------------------------------------------------------------------------------------------------
Monthly/Quarterly Quarterly Payment Dates: Monthly Payment Dates:
Payment Dates: the 7th day or, if the 7th the 7th day of each
day is not a business day, calendar month or, if the
then the next business day 7th day is not a business
of each January, April, July day, then the next business
and October. The first day. The first monthly
quarterly payment date will payment date will be in
be in October 2002. August 2002.
- --------------------------------------------------------------------------------------------------------
Clearance/Settlement: DTC/Euroclear/Clearstream, Offered in Australia only
Luxembourg
- --------------------------------------------------------------------------------------------------------
Initial Cut-Off Date: Close of business July 9, 2002
- --------------------------------------------------------------------------------------------------------
Pricing Date: On or about July 11, 2002
- --------------------------------------------------------------------------------------------------------
Closing Date: July 17, 2002
- --------------------------------------------------------------------------------------------------------
Step-Up Margin Date: The quarterly payment date falling in July 2009
- --------------------------------------------------------------------------------------------------------
Final Maturity Date: The quarterly payment date falling in July 2034
- --------------------------------------------------------------------------------------------------------
Pre-Funding Period: For the period from the closing date through, but
excluding, the first quarterly payment date, the issuer
trustee may acquire additional housing loans by applying
the money on deposit in the prefunding account.
- --------------------------------------------------------------------------------------------------------
4
STRUCTURAL OVERVIEW
The Interstar Millennium Trusts securitisation program was established
pursuant to a master trust deed dated December 1, 1999 among Perpetual Trustees
Victoria Limited and Interstar Securities (Australia) Pty Limited. The master
trust deed provides the general terms and structure for securitisations under
the program. A series notice among the issuer trustee, Interstar Nominees (B)
Pty Limited (ABN 15 075 329 412), Interstar Nominees (N) Pty Limited (ABN 11
092 095 648) and Interstar Nominees (R) Pty Limited (ABN 57 092 315 716), as
sellers, Interstar Securitisation Management Pty Limited, as trust manager,
Interstar Securities (Australia) Pty Limited, as servicer, The Bank of New
York, New York branch, as note trustee and Perpetual Trustee Company Limited,
as security trustee, will set out the specific details of the Interstar
Millennium Series 2002-1G Trust and the notes, which may vary from the terms
set forth in the master trust deed. Each securitisation under the program is a
separate transaction with a separate trust. The assets of the Interstar
Millennium Series 2002-1G Trust will not be available to pay the obligations of
any other trust, and the assets of other trusts will not be available to pay
the obligations of Perpetual Trustees Victoria Limited as trustee of the
Interstar Millennium Series 2002-1G Trust. See "Description of the Trust".
The Interstar Millennium Series 2002-1G Trust involves the
securitisation of housing loans originated by Interstar Securities (Australia)
Pty Limited in the name of Perpetual Trustees Victoria Limited, as trustee of a
number of warehouse trusts, and secured by mortgages over residential property
located in Australia. Each of Interstar Nominees (B) Pty Limited, Interstar
Nominees (N) Pty Limited and Interstar Nominees (R) Pty Limited, as
beneficiaries of the relevant warehouse trusts, will equitably assign its
beneficial interest in the housing loans to Perpetual Trustees Victoria Limited
as trustee of the trust, which will in turn issue the notes to fund the
acquisition of the housing loans.
The issuer trustee will grant a first ranking floating charge over all
assets which are subject to the trust under the security trust deed in favor of
Perpetual Trustee Company Limited, as security trustee, to secure the issuer
trustee's payment obligations to the noteholders and its other creditors. A
first ranking floating charge is a first priority security interest over a
class of assets, but does not attach to specific assets unless or until it
crystalizes, which means it becomes a fixed charge. The charge will crystalize
if, among other events, an event of default occurs under the security trust
deed. Once the floating charge crystalizes, the issuer trustee will no longer
be able to dispose of or create interests in the assets of the trust without
the consent of the security trustee. For a description of floating charges and
crystallization see "Description of the Transaction Documents -- The Security
Trust Deed -- Nature of the Charge".
Payments of interest and principal on the notes will come only from the
housing loans and other assets of the trust. The assets of the parties to the
transaction are not available to meet the payments of interest and principal on
the notes. If there are losses on the housing loans, the trust may not have
sufficient assets to repay the notes.
CREDIT ENHANCEMENTS
Payments of interest and principal on the Class A2 notes will be
supported by the following forms of credit enhancement.
SUBORDINATION
The Class B notes will be subordinated to the Class A2 notes in their
right to receive interest and principal payments. No Class A2 notes will be
issued until all of the Class B notes have been issued.
The credit support provided by the Class B notes is intended to enhance
the likelihood that the Class A2 notes will receive expected quarterly payments
of interest and principal. The following chart describes the initial credit
support provided by the Class B notes:
INITIAL SUPPORT
CLASS CREDIT SUPPORT PERCENTAGE
------- ---------------- ----------------
A2 B 7.0%
The initial support percentage in the preceding table is the initial
balance of the Class B notes as a percentage of the Australian dollar
equivalent of the principal balance of all of the notes on the closing date.
In certain circumstances, the issuer trustee may issue Class A1 notes.
See "-- Redraws" and "Interstar Residential Loan Program -- Special Features of
the Housing Loans -- Redraws".
5
If issued, Class A1 notes will, prior to the occurrence of an event of default
and enforcement of the charge under the security trust deed, rank equally with
the Class A2 notes in their right to receive interest payments and will rank in
priority to the Class A2 notes in their right to receive principal payments.
Following the occurrence of an event of default and enforcement of the charge
under the security trust deed, the Class A1 notes will rank equally with the
Class A2 notes in their right to receive both interest and principal payments.
MORTGAGE INSURANCE POLICIES
Mortgage insurance policies issued by, or transferred to, PMI Indemnity
Limited, GE Capital Mortgage Insurance Corporation (Australia) Pty Ltd, PMI
Mortgage Insurance Ltd, Royal & Sun Alliance Lenders Mortgage Insurance Limited
and the Commonwealth of Australia will provide full coverage for the balance
outstanding on each housing loan irrespective of its LVR. The mortgage
insurance policies are subject to some exclusions from coverage and rights of
termination which are described in "The Mortgage Insurance Policies".
TITLE INSURANCE POLICIES
Some housing loans may be covered by title insurance policies issued by
First American Title Insurance Company of Australia Pty Limited. Title
insurance will provide 100% coverage for losses arising as a result of a
relevant mortgage being subject to a prior encumbrance, not being validly
registered or being invalid or unenforceable. The title insurance policies are
subject to some exclusions from coverage and rights of termination which are
described in "The Title Insurance Policies".
LIQUIDITY ENHANCEMENT
To enable the issuer trustee to make timely payments of interest on the
notes and other trust expenses payable from interest collections on the housing
loans, the trust manager is required to ensure that the trust has an amount
equal to at least one percent of the Australian dollar equivalent of the
outstanding principal amount of the notes invested in highly-rated, short-term
investments. These liquid authorized investments are available to make interest
payments on the notes and to pay some other expenses of the trust if there are
not enough interest collections from the housing loans available to make those
payments. In addition, principal collections on the housing loans will be
available to make interest payments on the notes and to pay some other expenses
of the trust if there are not enough interest collections from the housing
loans and liquid authorized investments to make those payments. Any principal
collections used to make interest payments on the notes or to pay other
expenses of the trust will be replenished on future monthly payment dates from
excess interest collections, to the extent available.
Each mortgage insurance policy includes timely payment cover for losses
as a result of a borrower under a housing loan failing to pay all or part of a
payment when due. This timely payment cover comprises at least twelve months of
missed payment installments for each housing loan.
REDRAWS
Under the terms of each variable rate housing loan, a borrower may, at
the absolute discretion of the trust manager, redraw previously prepaid
principal. Provided the loan is not in arrears at the time of the request for a
redraw, a borrower may redraw an amount equal to the difference between the
scheduled principal balance of the loan and the current principal balance of
the loan. The issuer trustee will be reimbursed for any redraws it advances to
borrowers from principal collections on the housing loans. The amount that the
issuer trustee may advance to a borrower in respect of a particular housing
loan from time to time is limited to the difference between the scheduled
principal balance of the loan and the current principal balance of the loan and
may only be advanced in the circumstances described under "Interstar
Residential Loan Program -- Special Features of the Housing Loans -- Redraws".
6
Any redraws of previously prepaid principal will be funded first from
principal collections on the housing loans. If, on a monthly payment date,
principal collections on the housing loans for the collection period before
that monthly payment date are insufficient to fund redraws for that collection
period, then the trust manager may give the issuer trustee a direction to, and
the issuer trustee must, issue a series of Class A1 notes. The trust manager
must not give this direction unless it has received written confirmation from
each rating agency that the issue of the Class A1 notes would not result in a
downgrade or withdrawal of a rating of any note then outstanding. See
"Interstar Residential Loan Program -- Special Features of the Housing Loans".
HEDGING ARRANGEMENTS
To hedge its interest rate and currency exposures, the issuer trustee
will enter into the following hedging arrangements:
o a fixed-floating rate swap to hedge the basis risk between the
interest rate on the housing loans which are subject to a fixed
rate of interest and the floating rate obligations of the trust,
which includes the issuer trustee's interest payments to the
currency swap provider under the currency swap. On the closing
date, none of the housing loans will be fixed rate loans and no
fixed-floating rate swap will be entered into by the issuer
trustee. If, in the future, any fixed-rate housing loans are added
to the housing loan pool or if a borrower converts a floating rate
loan to a fixed-rate loan, a fixed floating rate swap will be
entered into by the issuer trustee.
o a currency swap to hedge the currency risk between, on one hand,
the collections on the housing loans and the amounts received by
the issuer trustee under the fixed-floating rate swap, which are
denominated in Australian dollars, and, on the other hand, the
obligation of the trust to pay interest and principal on the Class
A2 notes, which are denominated in U.S. dollars, together with the
basis risk between, on one hand, amounts in respect of interest
calculated under the fixed-floating rate swap by reference to the
Australian bank bill rate and, on the other hand, amounts in
respect of interest calculated under the Class A2 notes by
reference to LIBOR. Under a guarantee dated as of March 26, 2001
the currency swap guarantor will guarantee the payment obligations
of the currency swap provider under the currency swap.
OPTIONAL REDEMPTION
The trust manager will have the option to direct the issuer trustee to
redeem all of the notes on any quarterly payment date when the total
outstanding principal amount of the notes is equal to or less than 10% of the
total initial principal amount of the notes. If the trust manager directs the
issuer trustee to redeem the notes, the issuer trustee must so redeem the notes
and the noteholders will receive a payment equal to the outstanding principal
amount of the notes plus any outstanding interest on the notes.
The trust manager will have the option to direct the issuer trustee to,
and upon being so directed the issuer trustee must -- subject to ratings
confirmation -- redeem all of a class of notes on or after the step-up margin
date. The issuer trustee must not redeem the Class B notes unless the Class A
notes have been repaid in full or all notes are to be redeemed. If the issuer
trustee so redeems a class of notes, the relevant noteholders will receive a
payment equal to the outstanding principal amount of the class of notes plus
any outstanding interest on the class of notes.
If the trust manager satisfies the issuer trustee and the note trustee
prior to giving notice to the noteholders that on the next quarterly payment
date the currency swap provider would be required to deduct or withhold from
any payment under the currency swap any amount on account of any taxes, duties,
assessments or governmental charges, then the issuer trustee must, when so
directed by the trust manager, in its sole discretion, redeem all of the notes
at their outstanding principal amount, together with accrued interest.
7
PREFUNDING
If on the closing date the total aggregate purchase price for the
housing loans is less than the amount received in Australian dollars by the
issuer trustee from the proceeds of the issue of the notes, the issuer trustee
will retain the difference between the two amounts, to the extent it is not
invested in liquid authorized investments, in the prefunding account. The
balance of the prefunding account must not at any time exceed the Australian
dollar equivalent of US$250,000,000 or 25% of the Australian dollar equivalent
of the initial outstanding principal amount of the Class A2 notes as of the
closing date. See "Description of the Assets of the Trust -- Acquisition of
Housing Loans after the Closing Date".
8
THE HOUSING LOAN POOL
The housing loan pool will consist of residential housing loans bearing
either a fixed rate or variable rate of interest, secured by mortgages on owner
occupied and non-owner occupied residential properties. The housing loans will
have original terms to stated maturity of no more than 30 years. The pool of
housing loans has the following characteristics:
SELECTED HOUSING LOAN POOL DATA AS OF
CLOSE OF BUSINESS ON MAY 31, 2002
Housing Loan Pool Size ........................................ A$1,569,460,814
Total Number of Housing Loans ................................. 9,042
Average Housing Loan Balance .................................. A$173,575
Maximum Housing Loan Balance .................................. A$947,377
Minimum Housing Loan Balance .................................. A$0
Total Valuation of the Properties ............................. A$3,042,553,139
Maximum Remaining Term to Maturity in months .................. 352
Weighted Average Remaining Term to Maturity in months ......... 336
Weighted Average Seasoning in months .......................... 7
Weighted Average Original Loan-to-Value Ratio ................. 73.66%
Weighted Average Current Loan-to-Value Ratio .................. 69.99%
Maximum Current Loan-to-Value Ratio ........................... 90.00%
The original loan-to-value ratio of a housing loan is calculated by
comparing the initial principal amount of the housing loan to the most recent
valuation of the property that is currently securing the housing loan. Thus, if
collateral has been released from the mortgage securing a housing loan or if
the property securing the housing loan has been revalued, the original
loan-to-value ratio may not reflect the actual loan-to-value ratio at the
origination of that housing loan.
Before the issuance of the notes, housing loans may be added to or removed
from the housing loan pool. New housing loans may also be substituted for
housing loans that are removed from the housing loan pool. This addition,
removal or substitution of housing loans may result in changes in the housing
loan pool characteristics shown in the preceding table and could affect the
weighted average lives and yields of the notes. The sellers will not add,
remove or substitute any housing loans prior to the closing date if this would
result in a change of more than 5% in any of the characteristics of the pool of
housing loans described in the above table, unless a revised prospectus is
delivered to prospective investors.
9
WITHHOLDING TAX
Payments of principal and interest on the Class A2 notes will be reduced
by any applicable withholding taxes assessed on the issuer trustee or any paying
agent and could be reduced if any withholding taxes are assessed in respect of
payments under the housing loans. Neither the issuer trustee nor any paying
agent nor any borrower is obliged to pay any additional amounts to the Class A2
noteholders to cover any withholding taxes.
If the Commonwealth of Australia or any other applicable jurisdiction
requires the withholding of amounts:
o from payments of principal or interest to the noteholders;
o from payments by the issuer trustee to the currency swap provider
under the currency swap; or
o from payments by borrowers under the housing loans,
due to taxes, duties, assessments or other governmental charges, the issuer
trustee must, when so directed by noteholders representing at least 75% of the
outstanding principal amount of the notes and provided 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 Class A2 Notes -- Redemption of
the Notes for Taxation or Other Reasons".
U.S. TAX STATUS
In the opinion of Mayer, Brown, Rowe & Maw, special U.S. tax counsel to the
trust manager, the Class A2 notes will be characterized as debt for U.S. federal
income tax purposes. Each Class A2 noteholder, by acceptance of a Class A2 note,
agrees to treat the notes as indebtedness. See "United States Federal Income Tax
Matters".
AUSTRALIAN TAX STATUS
The Class A2 notes should be characterized as debt for Australian tax
purposes. See "Australian Tax Matters".
LEGAL INVESTMENT
The Class A2 notes will not constitute "mortgage-related securities" for
the purposes of the Secondary Mortgage Market Enhancement Act of 1984. No
representation is made as to whether the notes constitute legal investments
under any applicable statute, law, rule, regulation or order for any entity
whose investment activities are subject to investment laws and regulations or
to review by regulatory authorities. You are urged to consult with your own
legal advisors concerning the status of the Class A2 notes as legal investments
for you. See "Legal Investment Considerations".
ERISA CONSIDERATIONS
In general, the Class A2 notes will be eligible for purchase by
retirement plans subject to the Employee Retirement Income Security Act of
1974, as amended. Investors should consult their counsel with respect to the
consequences under ERISA and the United States Internal Revenue Code of 1986,
as amended, of the plan's acquisition and ownership of the Class A2 notes. See
"ERISA Considerations."
BOOK-ENTRY REGISTRATION
Persons acquiring beneficial ownership interests in the Class A2 notes
will hold their Class A2 notes through The Depository Trust Company in the
United States or Clearstream, Luxembourg or 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;
10
o amounts received under the fixed-floating rate swap and the
currency swap;
o amounts received under mortgage insurance policies and title
insurance policies;
o income in respect of authorized investments of the trust; and
o interest on amounts in the collection account.
Collections will be allocated between income and capital. Collections
attributable to interest and fees are known as income. The collections
attributable to principal are known as capital.
Income is normally used to pay fees and expenses of the issuer trustee
in connection with the trust, together with interest on the notes. Capital is
normally used to pay principal on the notes. However, if there is not enough
income to pay certain fees and expenses of the issuer trustee and interest on
the notes for a period, capital will be treated as income and applied to pay
such unpaid fees, expenses and interest. Any capital used to make interest
payments on the notes or to pay other fees and expenses of the issuer trustee
will be replenished on future monthly payment dates from excess income, to the
extent available.
INTEREST ON THE NOTES
Interest on the Class A2 notes will be payable quarterly in arrears on
each quarterly payment date. Interest on the Class B notes and the Class A1
notes will be payable in arrears on each monthly payment date. Amounts
available to make interest payments on the notes will be allocated rateably
between the Class A1 notes and the Class A2 notes. 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.
Interest on each class of notes is calculated for each interest period as
follows:
o at the note's interest rate;
o on the outstanding principal amount of that note at the beginning
of that interest period, after giving effect to any payments of
principal with respect to that note on that day; and
o on the basis of the actual number of days in that interest period
and a year of 360 days for the Class A2 notes, or 365 days for the
Class B notes and the Class A1 notes.
PRINCIPAL ON THE NOTES
Principal on the Class A2 notes will be payable on each quarterly
payment date. Principal on the Class B notes and the Class A1 notes will be
payable on each monthly payment date. Principal will be paid first on the Class
A1 notes, if any have been issued, and then on the Class A2 notes. The Class B
notes will not receive any principal payments unless amounts allocated to pay
principal on the Class A notes are sufficient to repay the outstanding
principal amount of the Class A notes in full. On each quarterly payment date,
the outstanding principal amount of the Class A2 notes will be reduced by the
amount of the principal payment made on that date on the Class A2 notes. On
each monthly payment date on or after the date sufficient funds have been
allocated to pay the Class A notes in full, the outstanding principal amount of
the Class B notes will be reduced by the amount of the principal payment made
on that date on the Class B notes. If the security trust deed is enforced after
an event of default, the proceeds from the enforcement will be distributed pro
rata among all of the Class A1 notes and Class A2 notes prior to any
distributions to the Class B notes.
ALLOCATION OF CASH FLOWS
On each monthly or quarterly payment date, as appropriate, the issuer
trustee will repay principal and interest to each noteholder to the extent that
there are collections received for those payments on that monthly or quarterly,
as appropriate, date. The charts on the next two pages summarize the flow of
payments.
11
DISTRIBUTION OF AVAILABLE INCOME ON
EACH MONTHLY PAYMENT DATE
AVAILABLE INCOME = INCOME + CAPITAL ALLOCATIONS + LIQUIDITY ALLOCATIONS
Pay to each seller the Accrued Interest Adjustment for that seller
Pay any taxes
Pay pro rata:
o the issuer trustee's fee
o any fees payable to the note trustee
Pay pro rata
o any fees payable pro rata to the paying agents
o any fees payable to the calculation agent
Pay the expenses of the trust other than any fees payable to the issuer trustee,
the note trustee, the paying agents, the calculation agent, the servicer and the
trust manager - in relation to the collection period
Pay the expenses of the trust - other than any fees payable to the issuer
trustee, the note trustee, the paying agents, the calculation agent, the
servicer and the trust manager - which the trust manager or the issuer trustee
reasonably anticipates will be incurred prior to the next monthly payment date
Pay the expenses of the trust - other than any fees payable to the issuer
trustee, the note trustee, the paying agents, the calculation agent, the
servicer and the trust manager - not covered by the two boxes above which have
already been incurred prior to that monthly payment date but which have not
previously been paid or reimbursed
Pay pro rata the trust manager's fee and the servicer's fee
Pay pro rata:
o any amounts payable to the fixed-floating rate swap provider under the
fixed-floating rate swap other than any break costs in respect of the
termination of the fixed floating rate swap
o any interest for the interest period ending on that monthly payment date
to the Class A1 noteholders
o (1) the A$ Interest Amount for that monthly payment date to the currency
swap provider for conversion to U.S. dollars and any reciprocal payment by
the currency swap provider is thereafter to be applied towards payment of
interest on the Class A2 notes on the related quarterly payment date or (2)
if the currency swap is terminated an A$ amount that the trust manager
determines in good faith to be applied on that monthly payment date in
order to enable the issuer trustee to meet its obligations to pay interest
on the Class A2 notes on the related quarterly payment date, to the note
trustee for purchase of U.S. dollars at the spot exchange rate to be
applied towards payment of interest on the Class A2 notes on the related
quarterly payment date
o to the currency swap provider any break costs payable under the currency
swap other than in respect of the termination of the currency swap where
the currency swap provider is the defaulting party
Pay any interest for the interest period ending on that monthly payment date to
the Class B noteholders
Where any part of Capital has been applied to supplement an Income Shortfall, by
application to replenish the assets of the trust of an amount equal to the
Capital so applied
Pay pro rata break costs to:
o the fixed-floating rate swap provider
o the currency swap provider in respect of the termination of the
currency swap where the currency swap provider is the defaulting
party
Pay pro rata fees payable to the sellers
Pay pro rata the balance to each holder of a residual income unit
12
DISTRIBUTION OF MORTGAGE PRINCIPAL REPAYMENTS AND
SURPLUS LIQUIDITY ON EACH MONTHLY PAYMENT DATE
Apply in funding redraws
Apply Capital to Available Income to make up any Income Shortfall
Payments of principal on the Class A1 notes
Pay up to the A$ Equivalent of the Currency Swap Notional Amount for that
monthly payment date to (1) the currency swap provider, and
any reciprocal payment by the currency swap provider is
thereafter to be applied to repaying principal on the Class A2 notes on the
related quarterly payment date or (2) if the currency swap has been terminated,
the note trustee for conversion into U.S. dollars at the spot exchange rate
to be applied in repaying principal on the Class A2 notes on the related
quarterly payment date, in each case until such time as all Class A2 notes have
been redeemed in full.
Payments of principal on the Class B notes
Payment as a distribution to the holder of the residual capital unit
13
RISK FACTORS
The Class A2 notes are complex securities issued by a foreign entity and
secured by property located in a foreign jurisdiction. You should consider the
following risk factors in deciding whether to purchase any Class A2 notes.
There may be other unforeseen reasons why you might not receive principal or
interest on your Class A2 notes. You should also read the detailed information
set out elsewhere in the prospectus.
THE NOTES WILL BE PAID ONLY FROM o The notes are debt obligations of the
THE ASSETS OF THE TRUST issuer trustee only in its capacity as
trustee of the trust. The notes do not
represent an interest in or obligation of
any of the other parties to the
transaction. The assets of the trust will
be the sole source of payments on the
notes. The issuer trustee's other assets
will only be available to make payments on
the notes if the issuer trustee is
negligent or commits fraud or a wilful
default. Therefore, if the assets of the
trust are insufficient to pay the interest
and principal on your notes when due,
there will be no other source from which
to receive these payments and you may not
get back your entire investment or the
yield you expected to receive.
THERE IS NO WAY TO PREDICT THE o The rate of principal and interest
ACTUAL RATE AND TIMING OF PAYMENTS payments on pools of housing loans varies
ON THE HOUSING LOANS among pools, and is influenced by a
variety of economic, demographic, social,
tax, legal and other factors, including
prevailing market interest rates for
housing loans and the particular terms of
the housing loans. Australian housing
loans have features and options that are
different from housing loans in the United
States, and thus will have different rates
and timing of payments from housing loans
in the United States. There is no
guarantee as to the actual rate of
prepayment on the housing loans, or that
the actual rate of prepayments will
conform to any model described in this
prospectus. The rate and timing of
principal and interest payments on the
housing loans and the ability to redraw
principal on the housing loans will affect
the rate and timing of payments of
principal and interest on your notes. The
performance of relevant counterparties
under each mortgage insurance policy, each
title insurance policy, the fixed-floating
rate swap and the currency swap will also
have a key impact on such payments in
terms of both the timeliness of such
payments and the amount of such payments.
Unexpected prepayment rates could have the
following negative effects:
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.
14
LOSSES AND DELINQUENT PAYMENTS ON o If borrowers fail to make payments of
THE HOUSING LOANS MAY AFFECT THE interest and principal under the housing
RETURN ON YOUR NOTES loans when due and the credit enhancements
described in this prospectus are not
enough to protect your notes from the
borrowers' failure to pay, then the issuer
trustee may not have enough funds to make
full payments of interest and principal
due on your notes. Consequently, the yield
on your notes could be lower than you
expect and you could suffer losses.
ENFORCEMENT OF THE HOUSING LOANS o Substantial delays could be encountered in
MAY CAUSE DELAYS IN PAYMENT AND connection with the liquidation of a
LOSSES housing loan, which may lead to shortfalls
in payments to you to the extent those
shortfalls are not covered by a mortgage
insurance policy or title insurance policy
or if the relevant mortgage insurer or
title insurer fails to perform its
obligations under the relevant mortgage
insurance policy or title insurance
policy.
o Further, enforcement expenses such as
legal fees, real estate taxes and
maintenance and preservation expenses, to
the extent not covered by a mortgage
insurance or title insurance policy, will
reduce the net amounts recoverable by the
issuer trustee from an enforced housing
loan or mortgage. If the proceeds of the
sale of a mortgaged property, net of these
expenses, are less than the amount due
under the related housing loan, the issuer
trustee may not have enough funds to make
full payments of interest and principal
due to you, unless the difference is
covered under a mortgage insurance policy
or title insurance policy. In addition,
even if these risks are covered by a
mortgage insurance policy or title
insurance policy there is no guarantee
that the mortgage insurer or title insurer
will promptly make any payment under any
mortgage insurance policy or title
insurance policy or that the mortgage
insurer or title insurer will have the
necessary financial capacity to make any
such payment at the relevant time.
CERTAIN PROVISIONS OF THE MORTGAGE o The liability of a mortgage insurer is
INSURANCE POLICIES MAY AFFECT governed by the terms of the relevant
THE RETURN ON YOUR NOTES mortgage insurance policy, which contains
certain exclusions that may allow that
mortgage insurer to reduce a claim or
terminate mortgage insurance cover in
respect of a housing loan in certain
circumstances. See "The Mortgage Insurance
Policies". Any such reduction or
termination may affect the ability of the
issuer trustee to pay you principal and
interest in full.
CERTAIN PROVISIONS OF THE TITLE o The liability of the title insurer is
INSURANCE POLICIES MAY AFFECT THE governed by the terms of the title
RETURN ON YOUR NOTES insurance policy, which contains certain
exclusions which may allow the title
insurer to reduce a claim or not provide
title insurance policy cover in respect of
a relevant mortgage relating to a housing
loan. See "The Title Insurance Policies".
Any such reduction or
15
termination may affect the ability of the
issuer trustee to recover all moneys
secured by the relevant mortgage and
thereby affect the ability of the issuer
trustee to pay you principal and interest
in full.
THE CLASS B NOTES PROVIDE ONLY o The amount of credit enhancement provided
LIMITED PROTECTION AGAINST LOSSES through the subordination of the Class B
notes to the Class A2 notes is limited and
could be depleted prior to the payment in
full of the Class A2 notes. If the
principal amount of the Class B notes is
reduced to zero, you may suffer losses on
your notes.
YOU MAY NOT BE ABLE TO RESELL YOUR o The underwriters are not required to
NOTES assist you in reselling your notes. A
secondary market for your notes may not
develop. If a secondary market does
develop, it might not continue or might
not be sufficiently liquid to allow you to
resell any of your notes readily or at the
price you desire. The market value of your
notes is likely to fluctuate, which could
result in significant losses to you.
YOU MAY EXPERIENCE SOME LOSSES ON o The issuer trustee will exchange payments
YOUR NOTES DUE TO THE QUARTERLY it receives from the borrowers on the
PAYMENT OBLIGATIONS OF THE CURRENCY housing loans in Australian dollars for
SWAP PROVIDER U.S. dollars with the currency swap
provider. Under the currency swap, the
issuer trustee will be required to pay the
currency swap provider the Australian
dollar interest and principal amount on
each monthly payment date while the
currency swap provider will be required to
pay the U.S. dollar interest and principal
amount to the issuer trustee on each
quarterly payment date. If the currency
swap provider becomes insolvent or is
otherwise unable to meet its obligations
under the currency swap before paying the
U.S. dollar interest and principal amount
to the issuer trustee on a quarterly
payment date, you may not be paid the full
amount of payments due to you on the next
quarterly payment date.
THE TERMINATION OF ANY OF THE o The issuer trustee will exchange the
SWAPS MAY SUBJECT YOU TO LOSSES interest payments from the fixed rate
FROM INTEREST RATE OR CURRENCY housing loans for variable rate payments
FLUCTUATIONS based upon the one-month Australian bank
bill rate. If the fixed-floating rate swap
is terminated or the fixed-floating rate
swap provider fails to perform its
obligations, you will be exposed to the
risk that the floating rate of interest
payable with respect to the notes will be
greater than the discretionary fixed rate
set by the servicer on the fixed rate
housing loans, which may lead to losses to
you. See "Description of the Class A2
Notes --The Fixed-Floating Rate Swap"
below.
o The issuer trustee will receive payments
from the borrowers on the housing loans
and the fixed-floating rate swap provider
in Australian dollars -- calculated, in
the case of payments by the fixed-floating
rate swap provider, by reference to the
Australian bank bill rate -- and make
payments to you in U.S. dollars,
calculated, in the case of payments of
interest, by reference to LIBOR.
16
Under the currency swap, the currency swap
provider will exchange Australian dollar
receipts for U.S. dollar payments, and in
the case of interest, amounts calculated
by reference to the Australian bank bill
rate for amounts calculated by reference
to LIBOR pursuant to the currency swap. If
the currency swap provider fails to
perform its obligations or if the currency
swap is terminated, the issuer trustee
might have to exchange its Australian
dollars for U.S. dollars, and its
Australian bank bill rate obligations for
LIBOR obligations, at a relevant spot
exchange rate that does not provide
sufficient U.S. dollars to make payments
to you in full.
PREPAYMENTS DURING A COLLECTION o If a prepayment is received on a housing
PERIOD MAY RESULT IN YOU NOT loan during a collection period, interest
RECEIVING YOUR FULL INTEREST on the housing loan will cease to accrue
PAYMENTS on that portion of the housing loan that
has been prepaid, starting on the date of
prepayment. The amount prepaid will be
invested in investments that may earn a
rate of interest lower than that paid on
the housing loan. If it is less, the
issuer trustee may not have sufficient
funds to pay you the full amount of
interest due to you on the next quarterly
payment date.
THE PROCEEDS FROM THE ENFORCEMENT o If the security trustee enforces the
OF THE SECURITY TRUST DEED MAY BE security interest over the assets of the
INSUFFICIENT TO PAY AMOUNTS DUE TO trust after an event of default under the
YOU security trust deed, there is no assurance
that the market value of the assets of the
trust will be equal to or greater than the
outstanding principal and interest due on
the notes, or that the security trustee
will be able to realize the full value of
the assets of the trust. The issuer
trustee, the security trustee, the note
trustee, the swap providers and other
service providers will generally be
entitled to receive the proceeds of any
sale of the assets of the trust, to the
extent they are owed fees and expenses,
before you. Consequently, the proceeds
from the sale of the assets of the trust
after an event of default under the
security trust deed may be insufficient to
pay you principal and interest in full.
IF THE TRUST MANAGER DIRECTS THE o If the trust manager directs the issuer
ISSUER TRUSTEE TO REDEEM THE NOTES trustee to redeem the notes early as
EARLY, THE YIELD ON YOUR NOTES MAY described in "Description of the Class A2
BE LOWER THAN EXPECTED Notes -- Optional Redemption of the
Notes", the purchase of the housing loans
will result in the early retirement of
your notes, which will shorten their
average lives and potentially lower the
yield on your notes.
THE IMPOSITION OF A WITHHOLDING o If a withholding tax is imposed on
TAX WILL REDUCE PAYMENTS TO YOU payments by the issuer trustee or any
AND MAY LEAD TO AN EARLY REDEMPTION paying agent of interest on your notes,
OF THE NOTES you will not be entitled to receive
grossed-up amounts to compensate for such
withholding tax. Thus, you will receive
less interest than is scheduled to be paid
on your notes.
o In addition, upon the occurrence of such
an event, the issuer trustee must, when so
directed by noteholders representing 75%
of the outstanding principal amount of the
notes, provided the issuer trustee will be
in a position
17
to discharge all of its liabilities in
respect of the notes, on the next
quarterly payment date redeem in whole,
but not in part, the aggregate outstanding
principal amount plus accrued interest on
the notes. If the option to redeem the
notes affected by a withholding tax is
exercised, you may not be able to reinvest
the redemption payments at a comparable
interest rate.
THE FEATURES OF THE HOUSING LOANS o The features of the housing loans,
MAY CHANGE, WHICH COULD AFFECT THE including their interest rates, may be
TIMING AND AMOUNT OF PAYMENTS TO changed by the servicer, either on its own
YOU initiative or at a borrowers' request.
Some of these changes may include the
addition of newly developed features which
are not described in this prospectus. As a
result of these changes and borrowers'
payments of principal, the concentration
of housing loans with specific
characteristics is likely to change over
time, which may affect the timing and
amount of payments you receive.
o If the servicer changes the features of
the housing loans, borrowers may elect to
refinance their loan with another lender
to obtain more favorable features. The
refinancing of housing loans could cause
you to experience higher rates of
principal prepayment than you expected,
which could affect the yield on your
notes.
THERE ARE LIMITS ON THE AMOUNT OF o If the interest collections during a
AVAILABLE LIQUIDITY TO ENSURE collection period and liquid authorized
PAYMENTS OF INTEREST TO YOU investments are insufficient to cover
fees, expenses and the interest payments
due with respect to the Class A2 notes on
the next monthly payment date, principal
collections collected during the
collection period may be used to cover
these amounts. In the event that there is
not enough money available from principal
collections, you may not receive a full
payment of interest on the related
quarterly payment date, which will reduce
the yield on your Class A2 notes.
THE USE OF PRINCIPAL COLLECTIONS o If principal collections are drawn upon to
TO COVER LIQUIDITY SHORTFALLS MAY cover shortfalls in interest collections,
LEAD TO PRINCIPAL LOSSES and there is insufficient excess interest
collections in succeeding collection
periods to repay those principal draws,
you may not receive full repayment of
principal on your notes.
A DECLINE IN AUSTRALIAN ECONOMIC o The Australian economy has been
CONDITIONS MAY LEAD TO LOSSES ON experiencing a prolonged period of
YOUR NOTES expansion with relatively low and stable
interest rates and steadily increasing
property values. If the Australian economy
were to experience a downturn, an increase
in interest rates, an increase in
unemployment, a fall in property values or
any combination of these factors,
delinquencies or losses on the housing
loans may increase, which may cause losses
on your notes.
18
CONSUMER PROTECTION LAWS MAY o Some of the housing loans are regulated by
AFFECT THE TIMING OR AMOUNT OF Consumer Credit Legislation. Under that
INTEREST OR PRINCIPAL PAYMENTS legislation, a borrower may have a right
TO YOU to apply to a court to:
o vary the terms of their housing loan on
the grounds of hardship or that it is
an unjust contract;
o reduce or cancel any interest rate
payable on the housing loan which is
unconscionable;
o have certain provisions of the housing
loan or relevant mortgage which are in
breach of the legislation declared
unenforceable;
o obtain an order for a civil penalty; or
o obtain restitution or compensation, in
relation to any breaches of the
Consumer Credit Legislation in relation
to the housing loan or relevant
mortgage.
o Any such order may affect the timing or
amount of interest or principal repayments
under the relevant housing loan, which may
in turn affect the timing or amount of
interest or principal payments to you
under the notes.
o In addition, a mortgagee's ability to
enforce a mortgage which is subject to the
Consumer Credit Legislation is limited by
various demand and notice procedures which
are required to be followed. For example,
as a general rule enforcement cannot occur
unless the relevant default is not
remedied within 30 days after a default
notice is given. Borrowers may also be
entitled to initiate negotiations with the
mortgagee for a postponement of
enforcement proceedings. Any order under
the Consumer Credit Legislation may affect
the timing or amount of interest or
principal payments or repayments under the
relevant housing loan, which may in turn
affect the timing or amount of interest or
principal payments or repayments to you
under the notes.
THE CONCENTRATION OF HOUSING LOANS o The trust contains a high concentration of
IN SPECIFIC GEOGRAPHIC AREAS MAY housing loans secured by properties
INCREASE THE POSSIBILITY OF LOSS located within New South Wales and
ON YOUR NOTES Victoria. Any deterioration in the real
estate values or the economy of either of
those States could result in higher rates
of delinquencies, foreclosures and loss
than expected on the housing loans. In
addition, either of these States may
experience natural disasters, which may
not be fully insured against and which may
result in property damage and losses on
the housing loans. These events may in
turn have a disproportionate impact on
funds available to the trust, which could
cause you to suffer losses.
THE CONTINUING UNCERTAINTY OVER o Since July 1, 2000, a goods and services
THE INTERPRETATION OF THE NEW GOODS tax is payable by all entities which make
AND SERVICES TAX IN AUSTRALIA MAY taxable supplies in Australia subject to
DECREASE THE FUNDS AVAILABLE TO certain transitional rules. Some service
THE TRUST TO PAY YOU providers to the issuer trustee may be
subject to GST in respect of the services
provided to the trust and may pass
19
on that additional cost to the issuer
trustee. The issuer trustee may also be
subject to GST on services provided by it.
To the extent that it has a net GST
liability, the issuer trustee will have
less trust funds available to meet its
obligations, and you may suffer losses.
See "Australian Tax Matters -- Goods and
Services Tax" below.
YOU WILL NOT RECEIVE PHYSICAL o Your ownership of the notes will be
NOTES REPRESENTING YOUR NOTES, registered electronically through DTC,
WHICH CAN CAUSE DELAYS IN Euroclear and/or Clearstream, Luxembourg.
RECEIVING DISTRIBUTION AND HAMPER The lack of physical certificates could:
YOUR ABILITY TO PLEDGE OR RESELL
YOUR NOTES o cause you to experience delays in
receiving payments on the notes because
the principal paying agent will be
sending distributions on the notes to
DTC instead of directly to you;
o limit or prevent you from using your
notes as collateral; and
o hinder your ability to resell the notes
or reduce the price that you receive
for them.
AUSTRALIAN TAX REFORM PROPOSALS o The Australian federal government proposes
COULD AFFECT THE TAX TREATMENT OF to reform business taxation as part of its
THE TRUST current tax reform program. There are
several proposed measures, including the
taxation of trusts as companies, that, if
enacted in their current form, could
impact upon the tax treatment of the
trust. See "Australian Tax Matters -- Tax
Reform Proposals".
SINCE THE TRUST MANAGER, THE o Each of Interstar Securitisation
ISSUER TRUSTEE AND THE SERVICER Management Pty Limited, Perpetual Trustees
ARE AUSTRALIAN ENTITIES, THERE Victoria Limited and Interstar Securities
REMAINS UNCERTAINTY AS TO THE (Australia) Pty Limited is an Australian
ENFORCEABILITY OF JUDGMENTS company and has agreed to submit to the
OBTAINED BY CLASS A2 NOTEHOLDERS jurisdiction of the New York State and
IN U.S. COURTS BY AUSTRALIAN United States federal courts for purposes
COURTS of any suit, action or proceeding arising
out of the offering of the Class A2 notes.
Generally, a final and conclusive judgment
obtained by noteholders in U.S. courts
would be recognized and enforceable
against the trust manager, the issuer
trustee or the servicer, as the case may
be, in the relevant Australian court
without reexamination of the merits of the
case. However, because of the foreign
location of the trust manager, the issuer
trustee and the servicer and their
directors, officers and employees and
their respective assets, it may be
difficult to effect service of process
over these persons or to enforce against
them judgments obtained in United States
courts based upon the civil liability
provisions of the U.S. federal securities
laws. See "Enforcement of Foreign
Judgments in Australia".
THE ISSUANCE OF CLASS A1 NOTES o The issuer trustee may issue Class A1
MAY AFFECT THE TIMING AND AMOUNT notes to fund redraws of previously
OF PAYMENTS MADE ON YOUR CLASS A2 prepaid principal under the housing loans
NOTES if principal collections on the housing
loans are not sufficient. See "Interstar
Residential Loan Program -- Special
Feature of the Housing Loans -- Redraws".
The Class A1 notes will be senior to the
20
Class A2 notes with respect to payments of
principal and rank equally with the Class
A2 notes with respect to payments of
interest before the enforcement of the
charge pursuant to the security trust deed
and rank equally in all respects
thereafter. If the proceeds of enforcement
of the charge pursuant to the security
trust deed are not sufficient to pay all
obligations of the issuer trustee under
the terms and conditions of the notes, the
risk to you of a loss on your investment
in the Class A2 notes is greater if any
Class A1 notes are outstanding at that
time.
PREPAYMENTS COULD RESULT FROM o If there is any principal amount remaining
PREFUNDING in the prefunding account following the
acquisition of additional housing loans by
the trust during the period from the
closing date up to but excluding the first
quarterly payment date, that amount will
be applied in repayment of principal to
the noteholders in the priority described
in "Description of the Class A2 Notes --
Principal Distributions". Any prepayment
will shorten the average weighted life of
the notes so prepaid. The greater the
prepayment, the shorter the weighted
average life of the affected notes which
may in turn affect the yield on your Class
A2 notes.
THE SERVICER'S RESPONSIBILITY TO o The servicer is obligated under the
MANAGE THE INTEREST RATE EXPOSURE transaction documents to set the interest
MAY AFFECT THE RATE OF PREPAYMENTS rates on the housing loans at a rate to
AND THE YIELD ON YOUR INVESTMENT ensure that at all times the issuer
trustee has sufficient cash available to
pay all interest payable on the notes and
otherwise comply with its duties and
obligations under the transaction
documents. If the servicer increases the
interest rates on the housing loans,
borrowers may be unable to make their
required payments under the housing loans.
In addition, if the interest rates are
increased above market rates, borrowers
may refinance their housing loans with
other lenders to obtain lower rates. This
could cause higher rates of principal
prepayment and delinquent payments by
borrowers than you expected and affect the
yield on your Class A2 notes.
TERMINATION PAYMENTS RELATING TO o Upon termination of a swap, a termination
A CURRENCY SWAP OR THE FIXED- payment will be due either from the issuer
FLOATING RATE SWAP ARE SUBJECT TO trustee to the swap provider or vice
CREDIT RISKS versa. If the swap provider is required to
make a termination payment to the issuer
trustee upon the termination of a swap,
then the trust will be exposed to credit
risk in relation to the capacity of that
swap provider to make that termination
payment.
CURRENCY SWAP TERMINATION PAYMENT o If the currency swap terminates before its
TO THE CURRENCY SWAP PROVIDER MAY scheduled termination date, a termination
REDUCE PAYMENTS ON YOUR CLASS A2 payment by either the issuer trustee or
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
21
swap provider will be payable out of
assets of the trust. If a currency swap
terminates early under circumstances where
the currency swap provider is the
defaulting party, any payment due by the
issuer trustee will have a lower priority
than payments of interest on the notes. If
the currency swap terminates early under
any other circumstances, any payment due
by the issuer trustee will have an equal
priority with interest payments on the
Class A2 notes.
THIS PROSPECTUS PROVIDES o This prospectus describes only the
INFORMATION REGARDING ONLY A characteristics of the housing loan pool
PORTION OF THE HOUSING LOAN POOL, as of May 31, 2002. While they must
AND ADDITIONAL HOUSING LOANS ADDED satisfy the criteria specified in this
TO THE HOUSING LOAN POOL COULD prospectus, the housing loans acquired on
HAVE DIFFERENT CHARACTERISTICS the closing date, and any additional
housing loans transferred to the trust
during the prefunding period, may not have
the characteristics or statistical
composition of the housing loan pool
described in this prospectus. For example,
such housing loans may be of a different
credit quality or seasoning. The trust
manager does not expect the
characteristics or statistical composition
of the housing loan pool acquired on the
closing date or the additional housing
loans acquired after the closing date to
differ materially from the characteristics
of the housing loan pool described in this
prospectus. If you purchase a Class A2
note, you must not assume that the
characteristics of the housing loan pool,
including the additional housing loans
acquired after the closing date, will be
identical to the characteristics of the
housing loan pool disclosed in this
prospectus.
RATINGS OF THE CLASS A2 NOTES DO o It is a condition to the issuance of the
NOT INSURE THEIR PAYMENT AND Class A2 notes that they be rated Aaa by
WITHDRAWAL OF ANY RATINGS MAY Moody's and AAA by S&P and that the Class
AFFECT THE VALUE OF THE CLASS A2 B notes be rated at least AA- by S&P. A
NOTES rating is not a recommendation to
purchase, hold or sell the Class A2 notes,
inasmuch as such a rating does not address
the market price or the suitability for a
particular investor of a security. The
rating of the Class A2 notes addresses the
likelihood of the payment of principal and
interest on the Class A2 notes pursuant to
their terms. There is no assurance that a
rating will remain for any given period of
time or that a rating will not be lowered
or withdrawn entirely by a rating agency,
if in its judgment circumstances in the
future so warrant. The ratings of the
Class A2 notes will be based primarily on
the creditworthiness of the housing loans,
the subordination provided by the Class B
notes with respect to the Class A notes,
the mortgage insurance policies and the
creditworthiness of the swap providers and
the mortgage insurers.
FAILURE OF THE SERVICER TO PERFORM o The servicer under the investment
ITS OBLIGATIONS MAY AFFECT THE management agreement has been appointed as
TIMING OF PAYMENTS ON YOUR CLASS A2 initial servicer of the housing loans.
NOTES Following a servicer event of default
under the investment management agreement,
the issuer trustee must immediately
terminate the investment
22
management agreement. Under the primary
backup servicer agreement, if Interstar
Securities (Australia) Pty Limited is
removed as servicer the issuer trustee
must offer to appoint Zurich Capital
Markets Australia Limited as servicer. If
Zurich Capital Markets Australia Limited
does not accept that appointment, under
the secondary backup servicer agreement
KPMG Corporate Finance (Aust) Pty Limited
has agreed to carry out the duties of the
servicer. There is no guarantee that a
replacement servicer will be found who
would be willing to service the housing
loans on the terms of the investment
management agreement or that it will be
able to service the housing loans with the
same level of skill and competence as the
initial servicer. A failure by the
servicer to properly perform its servicing
obligations may have an impact on the
timing of funds received by the issuer
trustee in respect of the housing loans.
CERTAIN HOUSING LOANS MAY NOT HAVE o The servicer will make certain
THE CHARACTERISTICS AS SET OUT IN representations and warranties to the
THE REPRESENTATIONS AND WARRANTIES issuer trustee, to each noteholder and to
MADE BY THE SERVICER the security trustee in relation to the
housing loans to be assigned to the issuer
trustee, as at the cut-off date and the
purchase date for those housing loans. The
issuer trustee has not investigated or
made any enquiries regarding the accuracy
of the representations and warranties.
o No independent investigation of whether
each and every housing loan offered for
sale at the closing date or any other date
complies with the eligibility requirements
set forth in "Description of the Assets of
the Trust -- Representations, Warranties
and Eligibility Criteria" has been
conducted.
ASSETS OF THE TRUST WILL NOT BE o The trust manager, not the issuer trustee,
AVAILABLE TO COVER ANY LOSSES takes responsibility for the prospectus.
SUFFERED BY YOU FOR ANY MISLEADING As a result, in the event that a person
STATEMENT OR OMISSION OF A MATERIAL suffers loss due to any information
MATTER IN THIS PROSPECTUS contained in this prospectus being
inaccurate or misleading, or omitting a
material matter or thing, that person will
not have recourse to the assets of the
trust.
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
121.
U.S. DOLLAR PRESENTATION
In this prospectus, references to "U.S. dollars" and "US$" are references
to U.S. currency and references to "Australian dollars" and "A$" are references
to Australian currency. Unless otherwise stated in this prospectus, any
translations of Australian dollars into U.S. dollars have been made at a rate
of US$0.5724 = A$1.00, the exchange rate as displayed on the Bloomberg Service
under AUD currency HP on June 5, 2002. Use of such rate is not a representation
that Australian dollar amounts actually represent such U.S. dollar amounts or
could be converted into U.S. dollars at that rate.
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 4, 333 Collins Street, Melbourne, Victoria,
Australia.
Perpetual Trustees Victoria Limited has 4,500,000 shares on issue with a
paid amount of A$0.50 each and an amount due and payable of A$0.50 each. The
shares are held by Perpetual Trustees Australia Limited.
The principal activities of Perpetual Trustees Victoria Limited are the
provision of trustee and other commercial services. Perpetual Trustees Victoria
Limited is an authorized trustee corporation and holds a securities dealers
license under the Corporations Act 2001 of Australia.
Perpetual Trustees Victoria Limited and its related companies provide a
range of services including custodial and administrative arrangements to the
funds management, superannuation, property, infrastructure and capital markets.
Perpetual Trustees Victoria Limited and its related companies are leading
trustee companies in Australia with in excess of A$100 billion under
administration.
DIRECTORS
The directors of the issuer trustee are as follows:
NAME BUSINESS ADDRESS PRINCIPAL ACTIVITIES
- ------------------------------ --------------------------- ---------------------
Phillip Vernon ............... Level 7, 39 Hunter Street Director
Sydney, NSW, Australia
Michael Stefanovski .......... Level 7, 39 Hunter Street Director
Sydney, NSW, Australia
Gai McGrath .................. Level 7, 39 Hunter Street Director
Sydney, NSW, Australia
Rohan Mead ................... Level 7, 39 Hunter Street Director
Sydney, NSW, Australia
THE TRUST MANAGER
Interstar Securitisation Management Pty Limited was incorporated on April
26, 2002, and continues to exist and operate as a limited liability company
under the Corporations Act 2001 of Australia. The registered office of
Interstar Securitisation Management Pty Limited is Level 28, 367 Collins
Street, Melbourne, Australia and the telephone and facsimile numbers for its
registered office are (613) 9612 1111 and (613) 9621 2368 respectively.
Interstar Securitisation Management Pty Limited has 1 share on issue with
a paid amount of A$1.00. The share is ultimately held by Arcturus Management
Pty Limited, (ABN 41 054 485 415), which is ultimately beneficially owned and
controlled by Vernon Spencer, an Australian individual, and his immediate
family.
DIRECTORS
The directors of Interstar Securitisation Management Pty Limited are
Vernon Spencer and Sam Kyriacou. Please refer to their descriptions below.
THE SERVICER
Interstar Securities (Australia) Pty Limited was incorporated on April 29,
1999, and continues to exist and operate as a limited liability company under
the Corporations Act 2001 of Australia. The
25
registered office of Interstar Securities (Australia) Pty Limited is Level 28,
367 Collins Street, Melbourne, Australia and the telephone and facsimile
numbers for its registered office are (613) 9612 1111 and (613) 9621 2368
respectively.
Interstar Securities (Australia) Pty Limited has 1 share on issue with a
paid amount of A$1.00. The share is ultimately held by Arcturus Management Pty
Limited, (ABN 41 054 485 415), which is ultimately beneficially owned and
controlled by Vernon Spencer, an Australian individual, and his immediate
family.
Interstar Securities (Australia) Pty Limited was incorporated as a result
of the corporate reconstruction of Interstar Securities Pty Limited, (ABN 32
054 485 380), incorporated in 1992, and its parent, Stargate Corporation Pty
Limited, (ACN 004 851 110), incorporated in 1970, which took place during 1999.
All of these entities are ultimately owned and controlled by Vernon Spencer, an
Australian individual and his immediate family.
Interstar Securities (Australia) Pty Limited is a wholly Australian owned,
privately held investment management firm which specializes in the structuring
and ongoing management of residential mortgage loan portfolios and
mortgage-backed securities. The Stargate Corporation Group has been actively
involved in the mortgage loan origination and management business for the past
27 years.
The operations of Interstar Securities (Australia) Pty Limited are
directed by an experienced senior management team, comprising full-time
directors and divisional heads of loan origination, loan processing and
compliance, customer service, investment and credit management and information
technology. This team is supported by 120 administrative, marketing, and
technical staff.
Since December 1989, Interstar Securities Pty Limited and Interstar
Securities (Australia) Pty Limited have issued approximately A$7.8 billion of
rated mortgage-backed securities.
As at May 31, 2002, Interstar Securities (Australia) Pty Limited managed a
housing loan portfolio of approximately A$6.3 billion.
DIRECTORS
The directors of Interstar Securities (Australia) Pty Limited are as
follows:
o VERNON SPENCER has been Executive Chairman and Managing Director of
Interstar Securities Pty Limited and Interstar Securities (Australia) Pty
Limited since their inception, and retired from the latter role on July
1, 1999. He is a Fellow of The Institute of Chartered Accountants in
Australia, a member of The Securities Institute of Australia, a Fellow of
the Mortgage Industry Association of Australia, and a former Member of
The Stock Exchange of Melbourne Limited. He is also Immediate Past
Chairman of the Board of Directors of SOCIETAS -- The International
Institute for Real Estate Finance, headquartered in Washington, D.C.,
USA, and has served on the International Committee of the Mortgage
Bankers Association of America. He was a co-founder of the Mortgage
Industry Association of Australia, its National President from 1986 until
1988, and its Victorian State President from 1984 until 1998. He was
awarded Life Membership of the Association in 1998. He has been actively
involved with all aspects of the mortgage industry for the past 30 years,
and is presently responsible for the strategic direction of the Interstar
Securities Group.
o SAM KYRIACOU has been a Director and the Chief Financial Officer of
Interstar Securities (Australia) Pty Limited since its inception, and was
appointed Managing Director and Chief Executive Officer on July 1, 1999.
He holds a Bachelor of Commerce degree from Melbourne University and is
an Associate of 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
26
with mortgage lending and financial services for the past 25 years and is
an Associate of the Mortgage Industry Association of Australia. He has
been responsible for marketing and origination of mortgage loan products,
liaison with loan originators and retailers and direct contact with
borrowers for Interstar Securities Pty Limited since 1992 and for
Interstar Securities (Australia) Pty Limited since its inception.
o ANDREW MOBILIA has been a Director of Interstar Securities (Australia)
Pty Limited since its inception and is responsible for lending and loan
administration. He has been involved with all aspects of secured lending,
administration and credit control for the past 25 years and is an
Associate of the Mortgage Industry Association of Australia. He has been
responsible for all aspects of managed asset compliance, loan review and
underwriting and arrears management for Interstar Securities Pty Limited
since 1992 and for Interstar Securities (Australia) Pty Limited since its
inception.
o BRUCE BAKER has been a Director of Interstar Securities (Australia) Pty
Limited since January 2001 and is responsible for all business
development activities. He has been involved with lending and mortgage
insurance for the past 21 years and is an Associate of the Mortgage
Industry Association of Australia. He has been National Underwriting and
Business Development manager of Interstar Securities Pty Ltd since 1994
and for Interstar Securities (Australia) Pty Limited since its inception.
Interstar Securities (Australia) Pty Limited is currently ranked as a
"Strong" residential loan servicer in Australia by S&P, and has been approved
by S&P as a "Global Select Servicer" for structured finance transactions.
THE SELLERS
INTERSTAR NOMINEES (B) PTY LIMITED
Interstar Nominees (B) Pty Limited was incorporated on August 21, 1996,
and continues to exist and operate as a limited liability company under the
Corporations Act 2001 of Australia.
Interstar Nominees (B) Pty Limited has 1 share on issue with a paid amount
of A$1.00. The share is ultimately held by Arcturus Management Pty Limited,
(ABN 41 054 485 415).
Interstar Nominees (B) Pty Limited is the trustee of the Star Bee Managed
Trust, which is not a trust within the Interstar Millennium Trusts
securitization program. In this capacity, it borrows money from Macquarie Bank
Limited to enable it to fund the acquisition of housing loans.
INTERSTAR NOMINEES (N) PTY LIMITED
Interstar Nominees (N) Pty Limited was incorporated on March 21, 2000, and
continues to exist and operate as a limited liability company under the
Corporations Act 2001 of Australia.
Interstar Nominees (N) Pty Limited has 1 share on issue with a paid amount
of A$1.00. The share is ultimately held by Arcturus Management Pty Limited,
(ABN 41 054 485 415).
Interstar Nominees (N) Pty Limited is the trustee of the Star Enn Managed
Trust, which is not a trust within the Interstar Millennium Trusts
securitization program. In this capacity, it borrows money from National
Australia Bank Limited to enable it to fund the acquisition of housing loans.
INTERSTAR NOMINEES (R) PTY LIMITED
Interstar Nominees (R) Pty Limited was incorporated on April 4, 2000, and
continues to exist and operate as a limited liability company under the
Corporations Act 2001 of Australia.
Interstar Nominees (R) Pty Limited has 1 share on issue with a paid amount
of A$1.00. The share is ultimately held by Arcturus Management Pty Limited,
(ABN 41 054 485 415).
27
Interstar Nominees (R) Pty Limited is the trustee of the Star Arr Managed
Trust, which is not a trust within the Interstar Millennium Trusts
securitization program. In this capacity, it borrows money from Barclays Bank
PLC to enable it to fund the acquisition of housing loans.
THE BACKUP SERVICERS
KPMG CORPORATE FINANCE (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.
ZURICH CAPITAL MARKETS AUSTRALIA LIMITED
Zurich Capital Markets Australia Limited (ZCMAL) is a limited liability
company incorporated in Australia with its principal place of business at Level
47, 2 Park Street, Sydney NSW 2000. It is a wholly owned indirect subsidiary of
Zurich Financial Services (ZFS). ZCMAL manages operations throughout the Asian
region to develop capital markets and banking operations for Zurich Capital
Markets, a subsidiary of ZFS.
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 2002-1G Trust is a separate and distinct trust from
any other trust established under the master trust deed. The assets of the
Interstar Millennium Series 2002-1G Trust are not available to meet the
liabilities of any other trust and the assets of any other trust are not
available to meet the liabilities of the Interstar Millennium Series 2002-1G
Trust.
INTERSTAR MILLENNIUM SERIES 2002-1G TRUST
The detailed terms of the Interstar Millennium Series 2002-1G Trust will
be as set out in the master trust deed and the series notice. To establish the
trust, Interstar Securities (Australia) Pty Limited, the trust manager and the
issuer trustee will execute a notice of creation of trust.
The series notice, which supplements the general framework under the
master trust deed with respect to the trust, does, among other things, the
following:
o specifies the details of the notes;
o establishes the cash flow allocation;
o sets out the various representations and undertakings of the parties
specific to the housing loans, which supplement those in the master trust
deed; and
o amends the master trust deed to the extent necessary to give effect to
the specific aspects of the trust and the issue of the notes.
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, PMI Mortgage Insurance Ltd, Royal & Sun Alliance
Lenders Mortgage Insurance Limited and the Commonwealth of Australia;
o the title insurance policies; and
o the individual property insurance policies covering the mortgaged
properties relating to the housing loans;
o amounts on deposit in the accounts established in connection with the
creation of the trust and the issuance of the notes, including the
collection account, and any instruments in which these amounts are
invested; and
o the issuer trustee's rights under the transaction documents, and its
rights under any fixed-floating rate swap and the currency swap.
THE HOUSING LOANS
The housing loans are secured by registered first ranking mortgages on
properties located in Australia. The housing loans have been originated in the
name of Perpetual Trustees Victoria Limited directly by Interstar Securities
(Australia) Pty Limited through an Australia-wide network of mortgage brokers,
accounting firms, legal firms, financial and investment advisors and other
sources referred to Interstar Securities (Australia) Pty Limited in the
ordinary course of its business under the Interstar Millennium Trusts
securitization program. On the closing date, Perpetual Trustees Victoria
Limited will cease to hold the pool of housing loans for the various warehouse
trusts and will instead hold them for the trust. Each housing loan was funded
by Perpetual Trustees Victoria Limited in its capacity as trustee of a
warehouse trust of which a seller is the beneficiary, and so Perpetual Trustees
Victoria Limited is the legal owner of all relevant housing loans. Each housing
loan will be one of the types of products described in "Interstar Residential
Loan Program -- General Features of the Housing Loans". The housing loans bear
either a fixed rate of interest or a variable rate of interest, or a
combination of both. Each housing loan is secured by a registered first ranking
mortgage over the related mortgaged property. The mortgaged properties consist
of owner-occupied properties and non-owner occupied properties, but do not
include mobile homes which are not permanently affixed to the ground,
commercial properties or unimproved land.
ACQUISITION OF HOUSING LOANS AFTER THE CLOSING DATE
THE PRE-FUNDING PERIOD
If on the closing date the total aggregate purchase price for the housing
loans is less than the amount received in Australian dollars by the issuer
trustee from the proceeds of the issue of the notes, the issuer trustee will
retain the difference between the two amounts, to the extent it is not invested
in Liquid Authorized Investments, in an account designated as the PREFUNDING
ACCOUNT. Before amounts on deposit in the Prefunding Account are invested in
acquiring or originating additional housing loans as described below they will
be invested in Liquid Authorized Investments. The balance of the Prefunding
30
Account must not at any time exceed the Australian dollar equivalent of
US$250,000,000 or 25% of the Australian dollar equivalent of the initial
outstanding principal amount of the Class A2 notes as of the closing date. At
any time during the period up to but excluding the first quarterly payment date
after the closing date the issuer trustee will apply the money on deposit in
the Prefunding Account to:
o acquire additional housing loans from the sellers; or
o originate additional housing loans in the ordinary course of Interstar
Securities (Australia) Pty Limited's business, provided that any
additional housing loan acquired or originated must:
o comply with the eligibility criteria; and
o not result in a downgrade or withdrawal of the rating of any notes by
any rating agency.
On the first quarterly payment date after the closing date, the balance of
the Prefunding Account that has not been used to acquire or originate
additional housing loans as described above will be applied as Mortgage
Principal Repayments as described in the section headed "Description of the
Class A2 Notes -- Principal Distributions".
TRANSFER AND ASSIGNMENT OF THE HOUSING LOANS
On the closing date, the housing loans purchased by the trust will be
specified in sale notices from the sellers, in their capacities as sellers of
the housing loans, to the issuer trustee.
Each seller will equitably assign its beneficial interest in the relevant
housing loans, the mortgages securing those housing loans and the mortgage
insurance policies, title insurance policies and insurance policies on the
mortgaged properties relating to those housing loans to the issuer trustee
pursuant to the sale notice. Both before and after the assignment, Perpetual
Trustees Victoria Limited will hold legal title to the housing loans and the
ancillary rights specified in each sale notice. Before the assignment,
Perpetual Trustees Victoria Limited will hold each of the housing loans and
ancillary rights in its capacity as trustee of a warehouse trust. After the
assignment, it will hold the housing loans and ancillary rights in its capacity
as trustee of the Interstar Millennium Series 2002-1G Trust.
REPRESENTATIONS, WARRANTIES AND ELIGIBILITY CRITERIA
Interstar Securities (Australia) Pty Limited, as the servicer, will make
various representations and warranties to the issuer trustee, each noteholder
and the security trustee as of the closing date with respect to the housing
loans being equitably assigned to the issuer trustee, including that:
o it has not done, or omitted to do, anything which would prevent each
housing loan from being valid, binding and enforceable against the
relevant borrower in all material respects except to the extent that it
is affected by laws relating to creditors rights generally, or
doctrines of equity;
o it has not done, or omitted to do, anything which would prevent the
relevant borrower from being the sole legal owner of the mortgaged
property and registered as the sole proprietor of the mortgaged
property;
o each housing loan is the subject of a valid, binding and enforceable
mortgage insurance policy from PMI Indemnity Limited, GE Capital
Mortgage Insurance Corporation (Australia) Pty Ltd, PMI Mortgage
Insurance Ltd, Royal & Sun Alliance Lenders Mortgage Insurance Limited
or the Commonwealth of Australia for its scheduled term;
o the officers of the servicer who have responsibility for the
transactions contemplated by the transaction documents do not have
actual notice that any mortgage insurer under any mortgage insurance
policy or any title insurer under any title insurance policy in
relation to a housing loan is insolvent or will be unable to pay a
valid claim;
o there has been no fraud, dishonesty, material misrepresentation or
negligence on the part of the servicer in connection with the selection
and offer to the issuer trustee of any of the housing loans;
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 relevant seller and the servicer; and
o prepared in accordance with applicable Consumer Credit
Legislation;
o with respect to housing loans acquired by the issuer trustee and
included in the housing loan pool:
o at least 90% of the aggregate mortgaged property of all housing
loans held by the issuer trustee will be located in metropolitan
areas of the capital cities and major regional centers of
Australia; and
o not more than 15% of the aggregate amount outstanding under the
housing loans will comprise individual housing loans each with an
amount outstanding exceeding A$500,000 and secured by a mortgage
over a single property;
o the relevant seller is the beneficial owner of the housing loan and
mortgage at the time of the equitable assignment;
o the issuer trustee will be the beneficial owner of the housing loan and
mortgage after that assignment, free of any encumbrances;
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 relevant seller in equity without prior consent being
required from, or notice of the assignment needing to be given to, the
mortgagor, the borrower or any other person;
o the loan agreement and the mortgage securing the housing loan have been
duly authorized and are in full force and effect and constitute legal,
valid and binding obligations of the relevant borrower and mortgagor
enforceable against that borrower and mortgagor in accordance with their
terms and are not subject to any dispute, offset or counterclaim;
o it is covered by a valid, binding and enforceable mortgage insurance
policy;
o it has a borrower -- and where the trust manager so requires, a
guarantor -- that is a natural person or a corporation;
o it was approved and originated by the servicer in the ordinary course of
its business;
o the borrower is required to repay the housing loan by no later than
October, 2032;
o it does not require, nor does the relevant loan agreement require, the
issuer trustee to provide any redraws or other advances once the initial
funding has been provided under the relevant loan agreement; and
o the housing loan is secured by a mortgage that constitutes a first
ranking mortgage over freehold land or Crown leasehold land in Australia
which is or will be registered under the relevant law relating to the
registration, priority or effectiveness of any mortgage over land in an
Australian jurisdiction and satisfies the following criteria:
o the amount secured or to be secured by the mortgage does not exceed
A$1,500,000;
o in respect of a mortgage;
o to secure a housing loan for a principal amount:
o not exceeding A$300,000 -- the loan-to-value ratio in respect of
that housing loan does not exceed 95%; and
o exceeding A$300,000 but not exceeding A$500,000 -- the
loan-to-value ratio in respect of that housing loan does not
exceed 90%; and
33
o exceeding A$500,000 but not exceeding A$1,000,000 -- the mortgaged
property must constitute a single property within the metropolitan
areas of Sydney, Melbourne, Brisbane, Adelaide or Perth and the
loan-to-value ratio in respect of that housing loan does not
exceed 80%; and
o exceeding A$1,000,000 but not exceeding A$1,250,000 -- the
mortgaged property must constitute a single property within the
metropolitan areas of Melbourne or Sydney and the
loan-to-value-ratio in respect of that housing loan does not
exceed 75%; and
o exceeding A$1,250,000 -- the mortgaged property must constitute a
single property within the metropolitan areas of Melbourne or
Sydney and the loan-to-value-ratio in respect of that housing loan
does not exceed 65%;
o the housing loan is secured by a mortgage over a property which has
erected on it a residential dwelling which dwelling is covered by fire
and general insurance by an insurer approved by the trust manager; and
o the mortgaged property is valued by a valuer approved by the servicer
unless:
o the loan-to-value ratio does not exceed 80%;
o the amount outstanding under the housing loan does not exceed:
o A$250,000 when secured over a single property within the
metropolitan area of Sydney;
o A$200,000 when secured over a single property within any other
city and metropolitan areas of Australia; or
o A$150,000 when secured over a single property within any other
areas of Australia.
The issuer trustee has not investigated or made any inquiries regarding
the accuracy of these representations and warranties and has no obligation to
do so. The issuer trustee is entitled to rely entirely upon the representations
and warranties being correct, unless an officer involved in the administration
of the trust has actual notice to the contrary.
BREACH OF REPRESENTATIONS AND WARRANTIES
If a seller, the servicer or the issuer trustee becomes aware that a
representation or warranty relating to any housing loan or mortgage is
incorrect, it must notify the other parties and the rating agencies within 10
business days of becoming aware. If the breach is not waived or remedied to the
satisfaction of the issuer trustee within five business days of the notice or
such longer time as the issuer trustee permits then, without any action being
required by either party, the relevant seller shall be obligated to repurchase
the affected housing loan for an amount equal to its Unpaid Balance. There can
be no assurance that the relevant seller will have sufficient funds to
repurchase such housing loans in such event.
Upon payment of the Unpaid Balance, Perpetual Trustees Victoria Limited
will continue to hold a legal interest in the affected housing loan and
mortgage and the relevant seller shall hold the beneficial interest in such
housing loan and mortgage and be entitled to all interest and fees that are
paid in respect of them from, and including, the date of repurchase.
OTHER FEATURES OF THE HOUSING LOANS
The housing loans have the following features.
o Interest is calculated daily and charged monthly in arrears.
o Payments can be on a monthly, bi-weekly or weekly basis. Payments from
borrowers are made by electronic funds transfer directly from each
borrower's bank account to a trust drawings account at National
Australia Bank Limited.
o They are governed by the laws of the Commonwealth of Australia and one
of the following Australian States or Territories:
34
o New South Wales;
o Victoria;
o Western Australia;
o Queensland;
o South Australia;
o Northern Territory; or
o the Australian Capital Territory.
DETAILS OF THE HOUSING LOAN POOL
The information in the following tables set out various details relating
to the housing loans to be sold to the trust on the closing date. The
information is provided as of the close of business on May 31, 2002. All
amounts have been rounded to the nearest Australian dollar. The sum in any
column may not equal the total indicated due to rounding.
Note that these details may not reflect the housing loan pool as of the
closing date because a seller may substitute loans proposed for sale with other
eligible housing loans or add additional eligible housing loans. A seller may
do this if, for example, the loans originally selected are repaid early.
A seller will not add, remove or substitute any housing loans prior to the
closing date if this would result in a change of more than 5% in any of the
characteristics of the pool of housing loans described in the table on page 9,
unless a revised prospectus is delivered to prospective investors.
35
HOUSING LOAN INFORMATION
ANALYSIS OF THE HOUSING LOAN POOL
Total pool size................................................$1,569,460,814
Total number of loans...................................................9,042
Average loan size....................................................$173,575
Maximum loan size....................................................$947,377
Total property value (current).................................$3,042,553,139
Weighted Average current LVR...........................................69.99%
% of pool with loans (greater than) 80% LVR..........................32.39%
Weighted Average Term to Maturity (months).............................335.84
Weighted Average Seasoning (months)......................................6.67
Maximum Remaining Term to Maturity (months)...............................352
% of pool with loans (greater than) $300,000 (by number).............13.51%
% of pool with loans (greater than) $300,000 (by loan amount)........30.50%
% of pool in arrears (by loan amount):
1-30 days...............................................................1.16%
31-60 days..............................................................0.00%
61+ days................................................................0.00%
Total.................................................................1.16%
HOUSING LOANS BY OCCUPANCY
% OF TOTAL % OF AVERAGE
NUMBER OF NO. OF DOLLAR AMOUNT TOTAL $ BALANCE WGT AVG
LOANS LOANS A$ AMOUNT A$ LVR %
----------- ------------ --------------- ----------- --------- -----------
Owner Occupied -- House..... 4,807 53.16% 758,281,854 48.32% 157,745 67.15%
Owner Occupied -- Unit ..... 645 7.13% 110,425,978 7.04% 171,203 73.00%
Investment -- House ........ 2,400 26.54% 461,540,049 29.41% 192,308 71.07%
Investment -- Unit ......... 1,190 13.16% 239,212,933 15.24% 201,019 75.46%
----- ------ ----------- ------ ------- -----
Total ................... 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
36
HOUSING LOANS BY LVR (LOAN-TO-VALUE RATIO)
% OF TOTAL % OF AVERAGE
NUMBER OF NO. OF DOLLAR AMOUNT TOTAL $ BALANCE WGT AVG
LOANS LOANS A$ AMOUNT A$ LVR %
----------- ------------ --------------- ----------- --------- -----------
(less than) =20% ........................ 530 5.86% 23,776,292 1.51% 44,861 13.92%
(greater than) 20% and (less than) =25% 210 2.32% 17,916,692 1.14% 85,318 22.77%
(greater than) 25% and (less than) =30% 258 2.85% 25,368,184 1.62% 98,326 27.68%
(greater than) 30% and (less than) =35% 232 2.57% 26,053,854 1.66% 112,301 32.48%
(greater than) 35% and (less than) =40% 345 3.82% 43,924,676 2.80% 127,318 37.82%
(greater than) 40% and (less than) =45% 357 3.95% 48,954,357 3.12% 137,127 42.47%
(greater than) 45% and (less than) =50% 314 3.47% 46,273,668 2.95% 147,368 47.51%
(greater than) 50% and (less than) =55% 328 3.63% 52,582,487 3.35% 160,312 52.42%
(greater than) 55% and (less than) =60% 404 4.47% 66,480,980 4.24% 164,557 57.69%
(greater than) 60% and (less than) =65% 532 5.88% 96,340,999 6.14% 181,092 62.75%
(greater than) 65% and (less than) =70% 596 6.59% 108,322,456 6.90% 181,749 67.31%
(greater than) 70% and (less than) =75% 881 9.74% 172,039,367 10.96% 195,277 72.78%
(greater than) 75% and (less than) =80% 1,610 17.81% 333,109,939 21.23% 206,901 77.53%
(greater than) 80% and (less than) =85% 1,062 11.75% 228,964,328 14.59% 215,597 80.96%
(greater than) 85% and (less than) =90% 1,383 15.29% 279,352,535 17.80% 201,990 88.78%
(greater than) 90% and (less than) =95% 0 0.00% 0 0.00% 0 0.00%
(greater than) 95% ...................... 0 0.00% 0 0.00% 0 0.00%
----- ------ ----------- ------ ------- -----
Total ................................. 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
HOUSING LOANS BY PRODUCT TYPES
% OF TOTAL % OF AVERAGE
NUMBER OF NO. OF DOLLAR AMOUNT TOTAL $ BALANCE WGT AVG
LOANS LOANS A$ AMOUNT A$ LVR %
----------- ------------ --------------- ----------- --------- -----------
Variable -- Principal & Interest..... 5,349 59.15% 916,574,498 58.40% 171,354 70.43%
Variable -- Interest Only ........... 2,977 32.92% 589,384,808 37.55% 197,979 70.29%
Variable -- Line of Credit .......... 716 7.92% 63,501,509 4.05% 88,689 60.76%
Fixed ............................... 0 0.00% 0 0.00% 0 0.00%
----- ------ ----------- ------ ------- -----
Total ............................ 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
37
HOUSING LOANS BY GEOGRAPHIC DISTRIBUTION
% OF TOTAL % OF AVERAGE
NUMBER OF NO. OF DOLLAR AMOUNT TOTAL $ BALANCE WGT AVG
LOANS LOANS A$ AMOUNT A$ LVR %
----------- ------------ --------------- ----------- --------- -----------
NSW (Metro) ............ 3,793 41.95% 806,524,681 51.39% 212,635 69.64%
NSW (Regional) ......... 517 5.71% 74,333,329 4.74% 143,778 67.51%
NSW (Country) .......... 278 3.07% 39,347,154 2.51% 141,537 71.08%
ACT (Metro) ............ 119 1.32% 15,334,829 0.98% 128,864 70.82%
ACT (Regional) ......... 0 0.00% 0 0.00% 0 0.00%
ACT (Country) .......... 0 0.00% 0 0.00% 0 0.00%
VIC (Metro) ............ 1,534 16.97% 263,699,626 16.80% 171,903 68.63%
VIC (Regional) ......... 54 0.60% 6,595,161 0.42% 122,133 69.42%
VIC (Country) .......... 419 4.63% 57,221,708 3.65% 136,567 70.82%
QLD (Metro) ............ 466 5.15% 73,657,972 4.69% 158,064 74.58%
QLD (Regional) ......... 622 6.88% 90,256,577 5.75% 145,107 72.49%
QLD (Country) .......... 82 0.91% 9,749,406 0.62% 118,895 73.28%
SA (Metro) ............. 803 8.88% 89,162,635 5.68% 111,037 72.54%
SA (Regional) .......... 0 0.00% 0 0.00% 0 0.00%
SA (Country) ........... 66 0.73% 7,136,574 0.45% 108,130 76.72%
WA (Metro) ............. 5 0.06% 955,678 0.06% 191,136 69.54%
WA (Regional) .......... 0 0.00% 0 0.00% 0 0.00%
WA (Country) ........... 269 2.97% 34,112,946 2.17% 126,814 65.70%
TAS (Metro) ............ 0 0.00% 0 0.00% 0 0.00%
TAS (Regional) ......... 0 0.00% 0 0.00% 0 0.00%
TAS (Country) .......... 0 0.00% 0 0.00% 0 0.00%
NT (Metro) ............. 13 0.14% 1,135,120 0.07% 87,317 61.71%
NT (Regional) .......... 0 0.00% 0 0.00% 0 0.00%
NT (Country) ........... 2 0.02% 237,418 0.02% 118,709 74.23%
----- ------ ----------- ------ ------- -----
Total ............... 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
HOUSING LOANS BY LOAN SIZE
% OF TOTAL % OF AVERAGE
NUMBER OF NO. OF DOLLAR AMOUNT TOTAL $ BALANCE WGT AVG
LOANS LOANS A$ AMOUNT A$ LVR %
----------- ------------ --------------- ----------- --------- -----------
(less than) =100,000 .............................. 2,696 29.81% 154,857,735 9.86% 57,440 53.57%
(greater than) 100,000 and (less than) = 150,000 1,729 19.12% 215,705,745 13.75% 124,758 66.89%
(greater than) 150,000 and (less than) = 200,000 1,557 17.21% 271,213,198 17.29% 174,190 70.53%
(greater than) 200,000 and (less than) = 250,000 1,053 11.65% 234,732,348 14.96% 222,918 72.35%
(greater than) 250,000 and (less than) = 300,000 785 8.68% 214,337,340 13.66% 273,041 74.40%
(greater than) 300,000 and (less than) = 350,000 454 5.02% 145,777,719 9.29% 321,096 72.60%
(greater than) 350,000 and (less than) = 400,000 335 3.70% 124,881,318 7.96% 372,780 74.56%
(greater than) 400,000 and (less than) = 500,000 306 3.38% 135,575,413 8.64% 443,057 74.25%
(greater than) 500,000 and (less than) = 750,000 116 1.28% 63,459,566 4.04% 547,065 70.40%
(greater than) 750,000 and (less than) = 950,000 11 0.12% 8,920,432 0.57% 810,948 70.67%
(greater than) 950,000 ........................... 0 0.00% 0 0.00% 0 0.00%
----- ------ ----------- ------ ------- -----
Total ........................................... 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
38
HOUSING LOANS BY POSTCODE CONCENTRATION -- TOP 10
BY LOAN AMOUNT
% OF TOTAL % OF AVERAGE
NUMBER OF NO. OF DOLLAR AMOUNT TOTAL $ BALANCE WGT AVG
POST CODE LOANS LOANS A$ AMOUNT A$ LVR %
----------- ----------- ------------ --------------- --------- --------- -----------
Rouse Hill ............ 2155 67 0.74% 16,842,547 1.07% 251,381 73.89%
Cabramatta ............ 2166 91 1.01% 16,789,244 1.07% 184,497 77.19%
Liverpool South ....... 2170 90 1.00% 16,251,046 1.04% 180,567 74.27%
St Johns Park ......... 2176 71 0.79% 15,788,622 1.01% 222,375 74.81%
Benowa ................ 4217 79 0.87% 12,981,526 0.83% 164,323 70.53%
Fairfield ............. 2165 81 0.90% 12,825,415 0.82% 158,338 76.31%
Greystanes ............ 2145 72 0.81% 12,325,647 0.79% 171,190 69.33%
Marrickville South..... 2204 45 0.50% 11,747,775 0.75% 261,062 72.64%
Carnes Hill ........... 2171 50 0.55% 10,866,987 0.69% 217,340 68.28%
Ashcroft .............. 2168 54 0.60% 10,130,780 0.65% 187,607 77.78%
---- -- ---- ---------- ---- ------- -----
Total .............. 700 7.75% 136,549,590 8.70% 195,071 73.68%
=== ==== =========== ==== ======= =====
HOUSING LOANS BY LOAN SEASONING
% OF TOTAL % OF AVERAGE
NUMBER OF NO. OF DOLLAR AMOUNT TOTAL $ BALANCE WGT AVG
LOANS LOANS A$ AMOUNT A$ LVR %
----------- ------------ --------------- ----------- --------- -----------
(less than) = 3 months ......................... 4,642 51.34% 831,348,384 52.97% 179,093 71.06%
(greater than) 3 and (less than) = 6 months .. 2,715 30.03% 505,177,061 32.19% 186,069 70.36%
(greater than) 6 and (less than) = 12 months . 518 5.73% 93,225,636 5.94% 179,972 70.49%
(greater than) 12 and (less than) = 18 months 40 0.44% 7,799,424 0.50% 194,986 68.09%
(greater than) 18 and (less than) = 24 months 16 0.18% 3,513,007 0.22% 219,563 69.65%
(greater than) 24 and (less than) = 36 months 35 0.39% 6,834,077 0.44% 195,259 66.17%
(greater than) 36 and (less than) = 48 months 1,010 11.17% 112,537,551 7.17% 111,423 61.65%
(greater than) 48 and (less than) = 60 months 41 0.45% 6,037,675 0.38% 147,260 54.99%
(greater than) 60 months ...................... 25 0.28% 2,987,999 0.19% 119,520 49.14%
----- ------ ----------- ------ ------- -----
Total ........................................ 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
HOUSING LOANS BY MATURITY
% OF TOTAL % OF AVERAGE
NUMBER OF NO. OF DOLLAR AMOUNT TOTAL $ BALANCE WGT AVG
LOANS LOANS A$ AMOUNT A$ LVR %
----------- ------------ ----------------- ----------- --------- -----------
October 15, 2014 ......... 5 0.06% 333,834 0.02% 66,767 45.23%
October 15, 2020 ......... 43 0.48% 4,337,781 0.28% 100,879 39.53%
October 15, 2022 ......... 300 3.32% 31,976,872 2.04% 106,590 57.98%
October 15, 2023 ......... 777 8.59% 93,611,650 5.96% 120,478 63.34%
October 15, 2028 ......... 839 9.28% 143,349,684 9.14% 170,858 66.00%
October 15, 2030 ......... 3,285 36.33% 593,062,041 37.79% 180,536 71.04%
October 15, 2031 ......... 3,793 41.95% 702,788,951 44.78% 185,286 71.54%
----- ------ ----------- ------ ------- -----
Total ................. 9,042 100.00% $1,569,460,814 100.00% 173,575 69.99%
===== ====== ============== ====== ======= =====
39
HOUSING LOANS BY MORTGAGE INSURER
% OF TOTAL % OF AVERAGE
NUMBER OF NO. OF DOLLAR AMOUNT TOTAL $ BALANCE WGT AVG
LOANS LOANS A$ AMOUNT A$ LVR %
----------- ------------ --------------- ----------- --------- -----------
PMI Indemnity Limited ........ 2,708 29.95% 435,300,482 27.74% 160,746 67.27%
Royal & Sun Alliance LMI ..... 2,949 32.61% 545,078,129 34.73% 184,835 70.64%
PMI Mortgage Insurance ....... 127 1.40% 18,425,223 1.17% 145,080 66.29%
GE Capital Mortgage Insurance 3,228 35.71% 568,560,383 36.23% 176,134 71.67%
Commonwealth of Australia .... 30 0.33% 2,096,598 0.13% 69,887 42.59%
----- ------ ----------- ------ ------- -----
Total ..................... 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
HOUSING LOANS BY MORTGAGE INSURER AND LVR
PMI INDEMNITY LIMITED
% OF TOTAL % OF AVERAGE
NUMBER OF NO. OF DOLLAR AMOUNT TOTAL $ BALANCE WGT AVG
LOANS LOANS A$ AMOUNT A$ LVR %
----------- ------------ --------------- ----------- --------- -----------
(less than) =20% ........................ 174 6.43% 7,587,035 1.74% 43,604 13.76%
(greater than) 20% and (less than) =25% 63 2.33% 6,060,681 1.39% 96,201 23.06%
(greater than) 25% and (less than) =30% 92 3.40% 8,820,483 2.03% 95,875 27.50%
(greater than) 30% and (less than) =35% 76 2.81% 8,292,986 1.91% 109,118 32.39%
(greater than) 35% and (less than) =40% 124 4.58% 14,962,434 3.44% 120,665 37.68%
(greater than) 40% and (less than) =45% 117 4.32% 17,436,573 4.01% 149,031 42.56%
(greater than) 45% and (less than) =50% 110 4.06% 15,099,002 3.47% 137,264 47.27%
(greater than) 50% and (less than) =55% 106 3.91% 16,720,543 3.84% 157,741 52.35%
(greater than) 55% and (less than) =60% 149 5.50% 22,146,685 5.09% 148,635 57.68%
(greater than) 60% and (less than) =65% 172 6.35% 28,625,312 6.58% 166,426 62.71%
(greater than) 65% and (less than) =70% 222 8.20% 38,366,955 8.82% 172,824 67.28%
(greater than) 70% and (less than) =75% 267 9.86% 50,071,480 11.51% 187,534 72.68%
(greater than) 75% and (less than) =80% 461 17.02% 89,702,218 20.61% 194,582 77.15%
(greater than) 80% and (less than) =85% 291 10.74% 58,399,076 13.42% 200,684 81.02%
(greater than) 85% and (less than) =90% 284 10.49% 53,009,019 12.18% 186,651 88.40%
(greater than) 90% and (less than) =95% 0 0.00% 0 0.00% 0 0.00%
(greater than) 95% ...................... 0 0.00% 0 0.00% 0 0.00%
--- ------ ---------- ------ ------- -----
Total ................................. 2,708 100.00% 435,300,482 100.00% 160,746 67.27%
===== ====== =========== ====== ======= =====
40
HOUSING LOANS BY MORTGAGE INSURER AND LVR
ROYAL & SUN ALLIANCE LMI
% OF TOTAL % OF AVERAGE
NUMBER OF NO. OF DOLLAR AMOUNT TOTAL $ BALANCE WGT AVG
LOANS LOANS A$ AMOUNT A$ LVR %
----------- ------------ --------------- ----------- --------- -----------
(less than) =20% ........................ 170 5.76% 7,988,670 1.47% 46,992 14.23%
(greater than) 20% and (less than) =25% 63 2.14% 5,496,963 1.01% 87,253 22.96%
(greater than) 25% and (less than) =30% 73 2.48% 7,354,689 1.35% 100,749 27.80%
(greater than) 30% and (less than) =35% 77 2.61% 8,918,778 1.64% 115,828 32.65%
(greater than) 35% and (less than) =40% 117 3.97% 16,040,012 2.94% 137,094 38.03%
(greater than) 40% and (less than) =45% 114 3.87% 14,893,610 2.73% 130,646 42.39%
(greater than) 45% and (less than) =50% 103 3.49% 16,095,601 2.95% 156,268 47.72%
(greater than) 50% and (less than) =55% 114 3.87% 18,561,187 3.41% 162,817 52.36%
(greater than) 55% and (less than) =60% 125 4.24% 22,504,012 4.13% 180,032 57.64%
(greater than) 60% and (less than) =65% 174 5.90% 34,246,462 6.28% 196,819 62.62%
(greater than) 65% and (less than) =70% 175 5.93% 34,201,913 6.27% 195,440 67.35%
(greater than) 70% and (less than) =75% 283 9.60% 58,442,689 10.72% 206,511 72.83%
(greater than) 75% and (less than) =80% 506 17.15% 114,107,246 20.94% 225,508 77.80%
(greater than) 80% and (less than) =85% 352 11.93% 80,265,695 14.73% 228,028 80.83%
(greater than) 85% and (less than) =90% 503 17.05% 105,960,602 19.44% 210,657 88.88%
(greater than) 90% and (less than) =95% 0 0.00% 0 0.00% 0 0.00%
(greater than) 95% ...................... 0 0.00% 0 0.00% 0 0.00%
--- ------ ----------- ------ ------- -----
Total ................................. 2,949 100.00% 545,078,129 100.00% 184,835 70.64%
===== ====== =========== ====== ======= =====
HOUSING LOANS BY MORTGAGE INSURER AND LVR
GE CAPITAL MORTGAGE INSURANCE CORPORATION
(AUSTRALIA) PTY LIMITED
% OF TOTAL % OF AVERAGE
NUMBER OF NO. OF DOLLAR AMOUNT TOTAL $ BALANCE WGT AVG
LOANS LOANS A$ AMOUNT A$ LVR %
----------- ------------ --------------- ----------- --------- -----------
(less than) =20% ........................ 164 5.08% 7,584,016 1.33% 46,244 14.06%
(greater than) 20% and (less than) =25% 75 2.32% 5,603,442 0.99% 74,713 22.31%
(greater than) 25% and (less than) =30% 87 2.70% 8,216,730 1.45% 94,445 27.68%
(greater than) 30% and (less than) =35% 74 2.29% 8,283,873 1.46% 111,944 32.30%
(greater than) 35% and (less than) =40% 98 3.04% 12,192,336 2.14% 124,412 37.75%
(greater than) 40% and (less than) =45% 121 3.75% 16,237,868 2.86% 134,197 42.49%
(greater than) 45% and (less than) =50% 97 3.00% 14,720,807 2.59% 151,761 47.51%
(greater than) 50% and (less than) =55% 103 3.19% 16,556,235 2.91% 160,740 52.58%
(greater than) 55% and (less than) =60% 117 3.62% 20,170,767 3.55% 172,400 57.79%
(greater than) 60% and (less than) =65% 178 5.51% 32,215,786 5.67% 180,988 62.92%
(greater than) 65% and (less than) =70% 191 5.92% 34,400,113 6.05% 180,105 67.30%
(greater than) 70% and (less than) =75% 313 9.70% 60,590,018 10.66% 193,578 72.84%
(greater than) 75% and (less than) =80% 622 19.27% 126,280,127 22.21% 203,023 77.58%
(greater than) 80% and (less than) =85% 401 12.42% 86,918,167 15.29% 216,754 81.04%
(greater than) 85% and (less than) =90% 587 18.18% 118,590,098 20.86% 202,027 88.87%
(greater than) 90% and (less than) =95% 0 0.00% 0 0.00% 0 0.00%
(greater than) 95% ...................... 0 0.00% 0 0.00% 0 0.00%
--- ------ ----------- ------ ------- -----
Total ................................. 3,228 100.00% 568,560,383 100.00% 176,134 71.67%
===== ====== =========== ====== ======= =====
41
HOUSING LOANS BY MORTGAGE INSURER AND LVR
PMI MORTGAGE INSURANCE LTD
% OF TOTAL % OF AVERAGE
NUMBER OF NO. OF DOLLAR AMOUNT TOTAL $ BALANCE WGT AVG
LOANS LOANS A$ AMOUNT A$ LVR %
----------- ------------ --------------- ----------- --------- -----------
(less than) =20% ........................ 15 11.81% 390,333 2.12% 26,022 10.93%
(greater than) 20% and (less than) =25% 4 3.15% 470,323 2.55% 117,581 21.97%
(greater than) 25% and (less than) =30% 4 3.15% 907,924 4.93% 226,981 28.31%
(greater than) 30% and (less than) =35% 4 3.15% 510,245 2.77% 127,561 33.90%
(greater than) 35% and (less than) =40% 2 1.57% 163,155 0.89% 81,578 37.07%
(greater than) 40% and (less than) =45% 3 2.36% 283,474 1.54% 94,491 40.50%
(greater than) 45% and (less than) =50% 4 3.15% 358,258 1.94% 89,565 47.68%
(greater than) 50% and (less than) =55% 3 2.36% 584,164 3.17% 194,721 51.78%
(greater than) 55% and (less than) =60% 9 7.09% 1,344,738 7.30% 149,415 57.11%
(greater than) 60% and (less than) =65% 8 6.30% 1,253,438 6.80% 156,680 62.87%
(greater than) 65% and (less than) =70% 8 6.30% 1,353,475 7.35% 169,184 67.28%
(greater than) 70% and (less than) =75% 16 12.60% 2,717,446 14.74% 169,840 72.46%
(greater than) 75% and (less than) =80% 21 16.54% 3,020,347 16.39% 143,826 76.86%
(greater than) 80% and (less than) =85% 18 14.17% 3,381,391 18.35% 187,855 81.05%
(greater than) 85% and (less than) =90% 8 6.29% 1,686,512 9.15% 210,814 88.39%
(greater than) 90% and (less than) =95% 0 0.00% 0 0.00% 0 0.00%
(greater than) 95% ...................... 0 0.00% 0 0.00% 0 0.00%
-- ------ --------- ------ ------- -----
Total ................................. 127 100.00% 18,425,223 100.00% 145,080 66.29%
=== ====== ========== ====== ======= =====
HOUSING LOANS BY MORTGAGE INSURER AND LVR
COMMONWEALTH OF AUSTRALIA
AVERAGE
NUMBER OF TOTAL NO. DOLLAR AMOUNT TOTAL $ BALANCE WGT AVG
LOANS OF LOANS A$ AMOUNT A$ LVR %
----------- ----------- --------------- ----------- --------- ----------
(less than) =20% ........................ 7 23.33% 226,239 10.79% 32,320 8.97%
(greater than) 20% and (less than) =25% 5 16.67% 285,283 13.61% 57,057 23.23%
(greater than) 25% and (less than) =30% 2 6.67% 68,357 3.26% 34,179 28.73%
(greater than) 30% and (less than) =35% 1 3.33% 47,972 2.29% 47,972 34.26%
(greater than) 35% and (less than) =40% 4 13.33% 566,740 27.03% 141,685 37.40%
(greater than) 40% and (less than) =45% 2 6.67% 102,832 4.90% 51,416 41.63%
(greater than) 45% and (less than) =50% 0 0.00% 0 0.00% 0 0.00%
(greater than) 50% and (less than) =55% 2 6.67% 160,359 7.65% 80,180 51.90%
(greater than) 55% and (less than) =60% 4 13.33% 314,777 15.01% 78,694 57.68%
(greater than) 60% and (less than) =65% 0 0.00% 0 0.00% 0 0.00%
(greater than) 65% and (less than) =70% 0 0.00% 0 0.00% 0 0.00%
(greater than) 70% and (less than) =75% 2 6.67% 217,735 10.39% 108,868 72.62%
(greater than) 75% and (less than) =80% 0 0.00% 0 0.00% 0 0.00%
(greater than) 80% and (less than) =85% 0 0.00% 0 0.00% 0 0.00%
(greater than) 85% and (less than) =90% 1 3.33% 106,304 5.07% 106,304 87.14%
(greater than) 90% and (less than) =95% 0 0.00% 0 0.00% 0 0.00%
(greater than) 95% ...................... 0 0.00% 0 0.00% 0 0.00%
- ------ ------- ------ ------- -----
Total ................................. 30 100.00% 2,096,598 100.00% 69,887 42.59%
== ====== ========= ====== ======= =====
42
HOUSING LOANS BY CURRENT COUPON RATES
% OF TOTAL % OF AVERAGE
NUMBER OF NO. OF DOLLAR AMOUNT TOTAL $ BALANCE WGT AVG
LOANS LOANS A$ AMOUNT A$ LVR %
----------- ------------ --------------- ----------- --------- -----------
(less than) =5.00 ........................... 29 0.32% 4,483,157 0.29% 154,592 78.39%
(greater than) 5.00% and (less than) =5.50% 1,013 11.20% 183,577,140 11.70% 181,221 70.09%
(greater than) 5.50% and (less than) =6.00% 3,117 34.47% 586,038,435 37.35% 188,014 71.50%
(greater than) 6.00% and (less than) =6.50% 2,408 26.63% 408,339,568 26.02% 169,576 73.88%
(greater than) 6.50% and (less than) =7.00% 1,121 12.40% 178,165,611 11.35% 158,935 63.22%
(greater than) 7.00% and (less than) =7.50% 951 10.52% 145,451,333 9.27% 152,946 61.63%
(greater than) 7.50% and (less than) =8.00% 252 2.79% 38,346,410 2.44% 152,168 66.10%
(greater than) 8.00% and (less than) =8.50% 87 0.96% 13,886,611 0.88% 159,616 72.27%
(greater than) 8.50% and (less than) =9.00% 18 0.20% 4,429,855 0.28% 246,103 71.13%
(greater than) 9.00% ........................ 46 0.51% 6,742,694 0.43% 146,580 69.49%
----- ------ ----------- ------ ------- -----
Total ..................................... 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
HOUSING LOANS BY MONTHS REMAINING TO MATURITY
% OF TOTAL % OF AVERAGE
NUMBER OF NO. OF DOLLAR AMOUNT TOTAL $ BALANCE WGT AVG
LOANS LOANS A$ AMOUNT A$ LVR %
----------- ------------ --------------- ----------- --------- ----------
(less than) = 144 months ......................... 0 0.00% 0 0.00% 0 0.00%
(greater than) 144 and (less than) = 156 months 5 0.06% 333,834 0.02% 66,767 45.23%
(greater than) 156 and (less than) = 168 months 0 0.00% 0 0.00% 0 0.00%
(greater than) 168 and (less than) = 180 months 0 0.00% 0 0.00% 0 0.00%
(greater than) 180 and (less than) = 192 months 0 0.00% 0 0.00% 0 0.00%
(greater than) 192 and (less than) = 204 months 0 0.00% 0 0.00% 0 0.00%
(greater than) 204 and (less than) = 216 months 0 0.00% 0 0.00% 0 0.00%
(greater than) 216 and (less than) = 228 months 43 0.48% 4,337,782 0.28% 100,879 39.53%
(greater than) 228 and (less than) = 240 months 0 0.00% 0 0.00% 0 0.00%
(greater than) 240 and (less than) = 252 months 300 3.32% 31,976,872 2.04% 106,590 57.98%
(greater than) 252 and (less than) = 264 months 777 8.59% 93,611,650 5.96% 120,478 63.34%
(greater than) 264 and (less than) = 276 months 0 0.00% 0 0.00% 0 0.00%
(greater than) 276 and (less than) = 288 months 0 0.00% 0 0.00% 0 0.00%
(greater than) 288 and (less than) = 300 months 0 0.00% 0 0.00% 0 0.00%
(greater than) 300 and (less than) = 312 months 0 0.00% 0 0.00% 0 0.00%
(greater than) 312 and (less than) = 324 months 839 9.28% 143,349,684 9.13% 170,858 66.00%
(greater than) 324 and (less than) = 336 months 0 0.00% 0 0.00% 0 0.00%
(greater than) 336 and (less than) = 348 months 3,285 36.33% 593,062,041 37.79% 180,536 71.04%
(greater than) 348 and (less than) = 360 months 3,793 41.95% 702,788,951 44.78% 185,286 71.54%
(greater than) 360 months ....................... 0 0.00% 0 0.00% 0 0.00%
----- ------ ----------- ------ ------- -----
Total .......................................... 9,042 100.00% 1,569,460,814 100.00% 173,575 69.99%
===== ====== ============= ====== ======= =====
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 sellers as described above. The mortgage brokers will receive an
originator's fee for approved loans, which will equal a portion of the interest
payments on the housing loans, throughout the term of such approved housing
loan. Interstar Securities (Australia) Pty Limited accepts applications for
both the purchase of acceptable residential security properties and the
refinance of existing housing loans.
APPROVAL AND UNDERWRITING PROCESS
Each lending service officer must attend ongoing in-house training courses
conducted by Interstar Securities (Australia) Pty Limited. This program covers
the duties, requirements and office procedures expected of each lending service
officer with particular emphasis on regulatory matters such as the Consumer
Credit Legislation and the Privacy Act. The lending service officer's
performance is constantly monitored and reviewed by his or her superiors to
ensure the maintenance of quality in the underwriting process. As part of his
or her ongoing review, the lending service officer is also provided with
further staff training particularly highlighting any changes to information
technology or legislative aspects that would impact on the day to day operation
of the business.
Housing loan applications are assessed by a lending service officer and
where an application is outside the current authority of the lending service
officer or the file has been declined it is referred to the lending service
officer's immediate superior for review. Where it is considered appropriate,
approval may be granted subject to the provision of further information.
All housing loan applications, including the applications relating to the
housing loans included in the assets of the trust, must satisfy Interstar
Securities (Australia) Pty Limited's credit policy and procedures described in
this section. Interstar Securities (Australia) Pty Limited, like lenders in the
Australian residential housing loan market, does not divide its borrowers into
groups of differing credit quality for the purposes of setting standard
interest rates for its residential housing loans. All borrowers must satisfy
Interstar Securities (Australia) Pty Limited's underwriting criteria described
in this section. Borrowers are not charged different rates of interest based on
their credit quality.
The approval process consists of determining the value of the proposed
security property, verifying the borrower's financial and credit history
details and ensuring these details satisfy Interstar Securities (Australia) Pty
Limited's underwriting criteria. The initial assessment of the applicant is
conducted by the mortgage broker on behalf of Interstar Securities (Australia)
Pty Limited, with the application then being submitted for approval, to
Interstar Securities (Australia) Pty Limited based upon it meeting satisfactory
credit standards. Approval of the loan application is at the total discretion
of Interstar Securities (Australia) Pty Limited.
All proposed security properties are required to be valued, subject to a
number of exceptions, by a valuer approved by Interstar Securities (Australia)
Pty Ltd. See "Description of the Assets of the Trust -- Representations,
Warranties and Eligibility Criteria". The valuer must be a current member of
the Australian Property Institute, have at least 5 years experience in the
geographical area in which the proposed security property is situated and have
the necessary professional indemnity insurance policy in force.
The valuation report must include the following details:
o the age, condition and size of the security property;
o comparable sale prices to other properties;
o the cost of any repair work required to the security property;
o the insurance replacement value of the security property; and
44
o any environmental factor that would have an adverse effect on the value
of the security property.
Where a valuation is not required, a copy of the stamped executed contract
of sale confirming actual purchase price of the property must be provided prior
to settlement.
Where more than one property is provided as security, the combined value
of the properties is taken into account.
Verification of an applicant's information is central to the approval
process. The mortgage broker obtains such information as tax returns, employer
confirmation letter, credit checks and a full and detailed current assets and
liabilities statement. This information is then submitted to Interstar
Securities (Australia) Pty Limited for assessment within its current lending
criteria.
The prospective borrower must have a satisfactory credit history, stable
employment, evidence of a genuine savings pattern and a minimum 5% deposit in
genuine savings. Gifts, inheritance and money borrowed from other sources are
not genuine savings and are not considered as part of the minimum "5% deposit"
requirement.
Interstar Securities (Australia) Pty Limited requires all borrowers to
satisfy a minimum disposable income level after all commitments, including
allowances for living expenses of the borrower and all dependents and the
proposed housing loan. To further safeguard that the borrower has the capacity
to meet all of his or her commitments, the assessment of the home loan
application is calculated at a rate 2% higher than the applicable rate.
Upon acceptance of the loan application by Interstar Securities
(Australia) Pty Limited, mortgage insurance coverage must be obtained by the
borrower. All loans through Interstar Securities (Australia) Pty Limited must
have 100% mortgage insurance coverage with the appropriate cash flow cover.
This mortgage insurance coverage remains in force from the date of settlement
until the earliest of discharge, full repayment of the housing loan or payment
of a claim. Full details of the mortgage insurance companies and their
respective ratings are set out separately in this prospectus.
All borrowers in respect of housing loans are natural persons or
corporations. Housing loans to corporations may also be secured by guarantees
from directors. Guarantees may also be obtained in other circumstances.
Upon acceptance of the risk by the mortgage insurer, Interstar Securities
(Australia) Pty Limited then instructs one of its panel solicitors or
settlement agents to prepare the necessary mortgage documentation and forward
same to the borrower for execution. The mortgage documents comprise of a loan
agreement document together with a general terms and conditions booklet. Upon
receipt of the executed mortgage documentation, certification of title will
then occur and settlement will take place. Upon settlement, the mortgage is
registered and the documents stored in the safe custody of the issuer trustee.
A condition of settlement is that the mortgagor establish and maintain full
replacement property insurance on the security property for the term of the
housing loan.
Interstar Securities (Australia) Pty Limited's credit policies and
approval procedures are subject to constant review. Improvements in procedures
are continuous. Credit policy may change from time to time due to business
conditions and legal or regulatory changes.
45
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 initial
Access Account 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 "Gold" 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 dollar proportion of the facility has the general
characteristics of one type of housing loan as referred to above;
and
o as to the remaining dollar proportion of the facility has the
general characteristics of another type of housing loan as referred
to above.
Each housing loan may have some or all of the features described in this
section. In addition, during the term of any housing loan the servicer may
agree to change any of the terms of that housing loan from time to time at the
request of the borrower.
SPECIAL FEATURES OF THE HOUSING LOANS
REDRAWS
Most housing loans, excluding fixed rate loans, provide borrowers with a
facility which allows borrowers to be provided with redraws. These redraws may
be accessed by way of direct credit to the relevant borrower's nominated bank
account, by electronic funds transfer or by check payments. This facility is
provided to a borrower at the absolute discretion of the servicer.
If a borrower makes any repayments under its housing loan which are in
addition to those that he or she is legally obliged to make under the terms of
the housing loan agreement then the issuer trustee
46
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.
47
THE MORTGAGE INSURANCE POLICIES
GENERAL
Each housing loan acquired by the trust will be insured by one of PMI
Indemnity Limited -- formerly CGU Lenders Mortgage Insurance Limited -- GE
Capital Mortgage Insurance Corporation (Australia) Pty Ltd, the Commonwealth of
Australia, PMI Mortgage Insurance Ltd or Royal & Sun Alliance Lenders Mortgage
Insurance Limited. The mortgage insurance policy in relation to each housing
loan is provided by the mortgage insurer at the time that the housing loan is
originated. The issuer trustee is the insured party under each mortgage
insurance policy in respect of each housing loan. The insurance provided under
each mortgage insurance policy covers 100% of the principal balance and any
unpaid interest on the housing loan insured regardless of the LVR of that
housing loan. This section is a summary of the general provisions of the
mortgage insurance policies.
CERTAIN PROVISIONS OF MORTGAGE INSURANCE POLICIES
RESTRICTIONS AND CANCELLATION
The amount recoverable under each mortgage insurance policy will generally
be:
o the whole of the loan amount due under the housing loan;
o any reasonable expenses incurred in enforcing the housing loan and any
mortgage and/or guarantee securing that housing loan;
o any unpaid interest calculated at the interest rate applicable if
interest is paid on the due date; and
o the timely payment for a period of at least 12 months after the date
upon which a claim is made under that contract of interest payments
under the housing loan which remain outstanding for a period of 14 days.
The actual amounts recoverable, and the amounts to be deducted, vary
between the policies. For example, rent on the mortgaged property and insurance
proceeds not spent on restoration or repair which are received by the issuer
trustee may reduce amounts payable by the insurer under a mortgage insurance
policy.
There are a number of requirements and restrictions imposed on the insured
under each mortgage insurance policy which may entitle the relevant insurer to
cancel the policy or reduce the amount of a claim. Depending on the mortgage
insurance policy, these may include:
o the existence of an encumbrance or other interest which affects or has
priority over the relevant mortgage;
o the relevant mortgage, the relevant housing loan or a guarantee or
indemnity relating to the housing loan ceasing to be effective;
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.
48
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 INDEMNITY LIMITED -- FORMERLY CGU LENDERS MORTGAGE INSURANCE LIMITED
PMI Indemnity Limited, previously named CGU Lenders Mortgage Insurance
Limited, was formed in 1971 as a specialist insurer to provide mortgage lenders
with protection against loss arising from borrower default. PMI Indemnity
Limited currently insures approximately 225,253 mortgage loans in excess of
A$25.1 billion. The business address of PMI Indemnity Limited is Level 23, 50
Bridge Street, Sydney, New South Wales, Australia.
On September 14, 2001 the acquisition by PMI Mortgage Insurance Australia
(Holdings) Pty Ltd of CGU Lenders Mortgage Insurance Limited was completed. CGU
Lenders Mortgage Insurance Limited changed its name to PMI Indemnity Limited on
September 14, 2001.
PMI Indemnity Limited's ability to meet claims under its mortgage
insurance policies is, in addition to its capital and reserves, supported by
reinsurance contracts with international reinsurance companies. These contracts
are reviewed annually and the level of cover provided complies with the
Australian Prudential Regulation Authority's conditions of authorization.
49
As of December 31, 2001, PMI Indemnity Limited had total assets of A$171
million, shareholders' equity of A$89 million and statutory reserves -- claims
equalization reserve -- of A$34 million. PMI Indemnity Limited has a financial
strength rating of Aa3 by Moody's, AA by Fitch, and AA- by S&P. Since September
14, 2001, PMI Indemnity Limited's obligations to its policyholders have been
managed by PMI Mortgage Insurance Ltd. PMI Indemnity Limited will cease, except
for increased advances on current insurance in force, writing new business from
July 1, 2002. Insurance in force as at July 1, 2002 will be maintained.
PMI MORTGAGE INSURANCE LTD
PMI Mortgage Insurance Ltd ("PMI"), previously known as MGICA Ltd., has
been providing lenders' mortgage insurance in Australia since 1965 and in New
Zealand since 1988. PMI insures approximately 408,750 mortgage loans in excess
of A$46.6 billion. The business address of PMI is Level 23, 50 Bridge Street,
Sydney, New South Wales Australia.
PMI's parent is PMI Mortgage Insurance Australia (Holdings) Pty Ltd, a
subsidiary of PMI Mortgage Insurance Co. that is a subsidiary of The PMI Group
Inc. PMI Mortgage Insurance Co. is a leading monoline mortgage insurer in the
United States currently having claims paying ability ratings of AA+ by S&P and
Fitch and Aa2 by Moody's.
As of December 31, 2001, PMI Mortgage Insurance Ltd had total assets of
A$434 million, shareholders' equity of A$230 million and statutory reserves --
claims equalization reserve -- of A$66 million. PMI Mortgage Insurance Ltd has
a financial strength rating by S&P of AA, by Fitch of AA and by Moody's of Aa3.
GE CAPITAL MORTGAGE INSURANCE CORPORATION (AUSTRALIA) PTY LTD AND COMMONWEALTH
OF AUSTRALIA
Housing Loans Insurance Corporation was an Australian Commonwealth
Government statutory authority established under the Housing Loans Insurance
Act 1965 and was, prior to its abolition, Australia's leading lenders' mortgage
insurer with approximately 50% of the Australia lenders' mortgage insurance
market.
On December 12, 1997, the Commonwealth Government:
o transferred the liabilities of Housing Loans Insurance Corporation in
relation to contracts of insurance entered into by Housing Loans
Insurance Corporation before December 12, 1997 to the Commonwealth
Government;
o appointed a new corporation, Housing Loans Insurance Corporation Ltd,
ABN 61 071 466 334, which has since changed its name to Housing Loans
Insurance Corporation Pty Ltd, to manage these contracts of insurance on
behalf of the Commonwealth of Australia; and
o sold Housing Loans Insurance Corporation Pty Ltd to GE Capital Australia
Ltd, ABN 60 008 562 534, an indirect wholly-owned subsidiary of the
General Electric Company, a corporation chartered under the laws of the
State of New York with its corporate headquarters in Fairfield,
Connecticut.
Housing Loans Insurance Corporation Pty Ltd changed its name to GE
Mortgage Insurance Pty Ltd as of February 14, 2000.
GE Capital Mortgage Insurance Corporation (Australia) Pty Ltd, ABN 52 081
448 440, commenced operations in March 1998. Along with GE Mortgage Insurance
Pty Ltd, it is a wholly-owned subsidiary of GE Capital Australia Limited, whose
ultimate parent is General Electric Company. General Electric Company is a
diversified industrial and financial services company with operations in over
100 countries. General Electric Company is currently rated AAA by S&P and Aaa
by Moody's. General Electric Company is the indirect owner of lenders' mortgage
insurance businesses in the United States, United Kingdom, Canada and Australia
which collectively insured over US$165 billion of loans worldwide.
50
As of December 31, 2001, GE Mortgage Insurance Pty Ltd had total assets of
A$212.5 million, shareholders' equity of A$94.7 million and statutory reserves
- -- claims equalization reserve -- of A$19.8 million. GE Mortgage Insurance Pty
Ltd currently has a claims paying ability rating of AAA by S&P and Fitch and
Aa1 by Moody's.
As of December 31, 2001, GE Capital Mortgage Insurance Corporation
(Australia) Pty Ltd had total assets of A$375.2 million, shareholders' equity
of A$172.2 million and statutory reserves -- claims equalization reserve -- of
A$8.8 million. GE Capital Mortgage Insurance Corporation (Australia) Pty Ltd
currently has a claims paying ability rating of AA by S&P and Fitch and Aa2 by
Moody's.
The Commonwealth of Australia currently has a local currency rating of AAA
by S&P and Fitch and Aaa by Moody's.
The business address of GE Capital Mortgage Insurance Corporation
(Australia) Pty Ltd is Level 23, 259 George Street, Sydney, New South Wales.
ROYAL & SUN ALLIANCE LENDERS MORTGAGE INSURANCE LIMITED
Following the merger of Sun Alliance Australia and Royal Insurance
Australia in 1992, Sun Alliance Mortgage Insurance Limited became known as
Royal & Sun Alliance Lenders Mortgage Insurance Limited. It has been operating
in the lenders' mortgage insurance market in Australia since 1989.
Following the merger, Royal & Sun Alliance Lenders Mortgage Insurance
Limited business displayed solid and profitable growth. It operates within a
Strategic Business Unit of the General Insurances Division of the Royal & Sun
Alliance Australia group. Royal & Sun Alliance Lenders Mortgage Insurance
Limited is a subsidiary of Royal and Sun Alliance Insurance Australia Limited,
which is one of the 5 largest insurers in Australia.
As of December 31, 2000, Royal and Sun Alliance Lenders Mortgage Insurance
Limited held assets of A$464 million and it had shareholders' equity of A$270
million, including statutory reserves -- claims equalization reserve -- of A$48
million. Royal and Sun Alliance Lenders Mortgage Insurance Limited has a claims
paying ability rating of AA- by S&P and Fitch and A2 by Moody's.
The business address of Royal & Sun Alliance Lenders Mortgage Insurance
Limited is 465 Victoria Avenue, Chatswood, New South Wales, Australia.
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
The title insurer is a subsidiary of First American Title Insurance
Company, a specialist title insurer. The parent company was founded over 110
years ago and has revenues approaching US$3 billion and more than 18,000
employees operating in the United States, Canada, the United Kingdom and
Australia.
First American Title Insurance Company is publicly traded on the New York
Stock Exchange through its holding company, the First American Financial
Corporation.
53
DESCRIPTION OF THE CLASS A2 NOTES
GENERAL
The issuer trustee will issue the Class A2 notes on the closing date
pursuant to a direction from the trust manager to the issuer trustee to issue
the notes and the terms of the master trust deed, the series notice and the
note trust deed. The notes will be governed by the laws of New South Wales,
Australia. The following summary describes the material terms of the Class A2
notes. The summary does not purport to be complete and is subject to the terms
and conditions of the transaction documents, the fixed-floating rate swap and
the currency swap.
FORM OF THE CLASS A2 NOTES
BOOK-ENTRY REGISTRATION
The Class A2 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
Class A2 noteholders will refer to actions taken by The Depository Trust
Company (DTC) upon instructions from its participating organizations and all
references in this prospectus to distributions, notices, reports and statements
to Class A2 noteholders will refer to distributions, notices, reports and
statements to DTC or its nominee, as the registered noteholder, for
distribution to owners of the Class A2 notes in accordance with DTC's
procedures.
Class A2 noteholders may hold their interests in the notes through DTC, in
the United States, or through Clearstream Banking, societe anonyme
(CLEARSTREAM, LUXEMBOURG) or the Euroclear System (EUROCLEAR), in Europe, if
they are participants in those systems, or indirectly through organizations
that are participants in those systems. Cede & Co., as nominee for DTC, will be
the registered noteholder of the Class A2 notes. Clearstream, Luxembourg and
Euroclear will hold omnibus positions on behalf of their respective
participants, through customers' securities accounts in Clearstream,
Luxembourg's and Euroclear's names on the books of their respective
depositaries. The depositaries in turn will hold the positions in customers'
securities accounts in the depositaries' names on the books of DTC.
DTC has advised the trust manager and the underwriters that it is:
o a limited-purpose trust company organized under the New York Banking
Law;
o a "banking organization" within the meaning of the New York Banking Law;
o a member of the Federal Reserve System;
o a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
o a "clearing agency" registered under the provisions of Section 17A of
the United States Securities Exchange Act of 1934 (the EXCHANGE ACT).
DTC holds securities for its participants and facilitates the clearance
and settlement among its participants of securities transactions, including
transfers and pledges, in deposited securities through electronic book-entry
changes in its participants' accounts. This eliminates the need for physical
movement of securities. DTC participants include securities brokers and
dealers, banks, trust companies, clearing corporations and other organizations.
Indirect access to the DTC system is also available to others including
securities brokers and dealers, banks, and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly. The rules applicable to DTC and its participants are on file with
the Securities and Exchange Commission (the SEC).
Transfers between participants on the DTC system will occur in accordance
with DTC rules. Transfers between participants on the Clearstream, Luxembourg
system and participants on the Euroclear system will occur in accordance with
their rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream,
Luxembourg participants or Euroclear participants,
54
on the other, will be effected by DTC in accordance with DTC rules on behalf of
the relevant European international clearing system by that system's
depositary. However, these cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in that system in accordance with its rules and procedures and
within its established deadlines, European time. The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its depositary to take action to effect
final settlement on its behalf by delivering or receiving securities in DTC,
and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Clearstream, Luxembourg
participants and Euroclear participants may not deliver instructions directly
to their system's depositary.
Because of time-zone differences, credits of securities in Clearstream,
Luxembourg or Euroclear as a result of a transaction with a DTC participant
will be made during the subsequent securities settlement processing, dated the
business day following the DTC settlement date. The credits for any
transactions in these securities settled during this processing will be
reported to the relevant Clearstream, Luxembourg participant or Euroclear
participant on that business day. Cash received in Clearstream, Luxembourg or
Euroclear as a result of sales of securities by or through a Clearstream,
Luxembourg participant or a Euroclear participant to a DTC participant will be
received and available on the DTC settlement date. However, it will not be
available in the relevant Clearstream, Luxembourg or Euroclear cash account
until the business day following settlement in DTC.
Purchases of Class A2 notes held through the DTC system must be made by or
through DTC participants, which will receive a credit for the Class A2 notes on
DTC's records. The ownership interest of each actual Class A2 noteholder is in
turn to be recorded on the DTC participants' and indirect participants'
records. Class A2 noteholders will not receive written confirmation from DTC of
their purchase. However, noteholders are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the DTC participant or indirect participant
through which the noteholder entered into the transaction. Transfers of
ownership interests in the Class A2 notes are to be accomplished by entries
made on the books of DTC participants acting on behalf of the Class A2
noteholders. Class A2 noteholders will not receive notes representing their
ownership interest in offered notes unless use of the book-entry system for the
Class A2 notes is discontinued.
To facilitate subsequent transfers, all securities deposited by DTC
participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of securities with DTC and their registration in the name of Cede &
Co. effects no change in beneficial ownership. DTC has no knowledge of the
actual holders of the Class A2 notes; DTC's records reflect only the identity
of the DTC participants to whose accounts the Class A2 notes are credited,
which may or may not be the actual beneficial owners of the Class A2 notes. The
DTC participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC participants,
by DTC participants to indirect participants, and by DTC participants and
indirect participants to Class A2 noteholders will be governed by arrangements
among them and by any statutory or regulatory requirements as may be in effect
from time to time.
Neither DTC nor Cede & Co. will consent or vote on behalf of the notes.
Under its usual procedures, DTC mails an omnibus proxy to the issuer trustee as
soon as possible after the record date, which assigns Cede & Co.'s consenting
or voting rights to those DTC participants to whose accounts the Class A2 notes
are credited on the record date, identified in a listing attached to the proxy.
Principal and interest payments on the Class A2 notes will be made to DTC.
DTC's practice is to credit its participants' accounts on the applicable
payment date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
that payment date. Standing instructions, customary practices, and any
statutory or regulatory requirements as may be in effect from time to time will
govern payments by DTC participants to Class A2 noteholders. These payments
will be the responsibility of the DTC participant and not of DTC, the
55
issuer trustee, the note trustee, the principal paying agent or the Luxembourg
paying agent. Payment of principal and interest to DTC is the responsibility of
the issuer trustee, disbursement of the payments to DTC participants is the
responsibility of DTC, and disbursement of the payments to Class A2 noteholders
is the responsibility of DTC participants and indirect participants.
DTC may discontinue providing its services as securities depository for
the notes at any time by giving reasonable notice to the principal paying
agent. Under these circumstances, if a successor securities depository is not
obtained, definitive notes are required to be printed and delivered.
According to DTC, the foregoing information about DTC has been provided
for informational purposes only and is not intended to serve as a
representation, warranty, or contract modification of any kind.
Clearstream, Luxembourg is a company with limited liability incorporated
under the laws of Luxembourg. Clearstream, Luxembourg holds securities for its
participating organizations and facilitates the clearance and settlement of
securities transactions between Clearstream, Luxembourg participants through
electronic book-entry changes in accounts of Clearstream, Luxembourg
participants, thereby eliminating the need for physical movement of notes.
Transactions may be settled in Clearstream, Luxembourg in any of 36 currencies,
including U.S. dollars.
Clearstream, Luxembourg participants are financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, and clearing corporations. Indirect access to Clearstream,
Luxembourg is also available to others, including banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Clearstream, Luxembourg participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for its participants and
to clear and settle transactions between Euroclear participants through
simultaneous electronic book-entry delivery against payment. This eliminates
the need for physical movement of notes. Transactions may be settled in any of
40 currencies, including U.S. dollars.
Euroclear is owned by Euroclear Clearance System Public Limited Company
and operated through a license agreement by Euroclear Bank S.A./N.V., a bank
incorporated under the laws of the Kingdom of Belgium, the EUROCLEAR OPERATOR.
The Euroclear operator is regulated and examined by the Belgian Banking and
Finance Commission and the National Bank of Belgium.
Euroclear participants include banks, including central banks, securities
brokers and dealers and other professional financial intermediaries. Indirect
access to Euroclear is also available to other firms that maintain a custodial
relationship with a Euroclear participant, either directly or indirectly.
Securities clearance accounts and cash accounts with the Euroclear
operator are governed by the "Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System". These terms and
conditions govern transfers of securities and cash within Euroclear, withdrawal
of securities and cash from Euroclear, and receipts of payments for securities
in Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific notes to specific securities clearance accounts. The
Euroclear operator acts under these terms and conditions only on behalf of
Euroclear participants and has no record of or relationship with persons
holding through Euroclear participants.
Distributions on the Class A2 notes held through Clearstream, Luxembourg
or Euroclear will be credited to the cash accounts of Clearstream, Luxembourg
participants or Euroclear participants in accordance with the relevant system's
rules and procedures, to the extent received by its depositary. Clearstream,
Luxembourg or the Euroclear operator, as the case may be, will take any other
action permitted to be taken by a Class A2 noteholder on behalf of a
Clearstream, Luxembourg participant or Euroclear participant only in accordance
with its rules and procedures, and depending on its depositary's ability to
effect these actions on its behalf through DTC.
Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of Class A2 notes among
participants of DTC, 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.
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DEFINITIVE NOTES
Notes issued in definitive form are referred to in this prospectus as
"definitive notes". Class A2 notes will be issued as definitive notes, rather
than in book entry form to DTC or its nominees, only if one of the following
events occurs:
o the principal paying agent advises the trust manager in writing that DTC
is no longer willing or able to discharge properly its responsibilities
as depository for the Class A2 notes, and the trust manager is not able
to locate a qualified successor;
o the issuer trustee, at the direction of the trust manager, advises the
principal paying agent in writing that it elects to terminate the
book-entry system through DTC; or
o after the occurrence of an event of default, the note trustee, at the
written direction of noteholders holding a majority of the outstanding
principal balance of the Class A2 notes, advises the issuer trustee and
the principal paying agent, that the continuation of a book-entry system
is no longer in the best interest of the Class A2 noteholders.
Definitive notes will be transferable and exchangeable at the offices of
the note registrar, which is initially the principal paying agent located at
101 Barclay Street 21W New York, NY 10286. Definitive notes will also be
transferable and exchangeable at the specified offices of the Luxembourg
transfer agent. The Bank of New York (Luxembourg) S.A., with initial specified
offices located at Aerogolf Center, 1A, Hoehenhof, L-1736 Senningerberg,
Luxembourg, has initially been appointed as the Luxembourg transfer agent. The
note registrar and/or the Luxembourg transfer agent will not impose a service
charge for any registration of transfer or exchange, but may require payment of
an amount sufficient to cover any tax or other governmental charge.
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 or the Luxembourg transfer agent, together with the form of
transfer endorsed on it duly completed and executed.
Neither the note registrar nor the Luxembourg transfer agent shall be
required to register the transfer or exchange of any definitive notes within 10
days preceding a quarterly payment date.
DISTRIBUTIONS ON THE NOTES
Collections in respect of interest and principal will be received during
each collection period. Collections include the following:
o payments of interest, principal and fees, including prepayments of
principal under the housing loans;
o proceeds from the enforcement of the housing loans and registered
mortgages relating to those housing loans;
o amounts received under mortgage insurance policies and title insurance
policies;
o amounts received under the fixed-floating rate swap and the currency
swap;
o income in respect of authorized investments of the trust; and
o interest on amounts in the collection account.
The issuer trustee will make payments on a monthly basis on each monthly
payment date. On each quarterly payment date, the principal paying agent will
distribute, indirectly through DTC and/or the depositaries, principal and
interest, to the owners of the Class A2 notes as of the date which is 4
business days prior to that quarterly payment date if the Class A2 notes are
held in book-entry form, or, if the Class A2 notes are held in definitive form,
the last day of the prior calendar month. Payments on the definitive notes will
be made to the Class A2 noteholder of record by US$ check drawn on a bank in
New York City and either mailed to the address of the Class A2 noteholder shown
on the register as of 4:00 pm Melbourne time on the date that is four business
days before the quarterly payment date or transferred to a US$ account
maintained by the Class A2 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 monthly payment date, the period from, and
including, the date which is 4 business days before the date that
is one calendar month preceding that monthly payment date to,
but excluding, the date which is 4 business days before that
monthly payment date. However, the first and last collection
periods are as follows:
o first: period from and excluding the initial cut-off date to
and including July 31, 2002.
o last: period from and including the date which is 4 business
days before the monthly payment date immediately prior to
the final monthly payment date to and excluding the day
which is 4 business days before that final monthly payment
date.
INTEREST PERIOD ................ with respect to the A$ Interest Amount, the Class A1 and the
Class B notes, each period from and including a monthly
payment date to and excluding the next monthly payment date.
However, the first and last Interest Periods for the A$ Interest
Amount, the Class A1 and the Class B notes are as follows:
o first: period from and including the closing date to and
excluding the first monthly payment date.
o last: period from and including the monthly payment date
prior to the earlier of the final maturity date and the date on
which that note is redeemed in full to and excluding the
final maturity date or the date on which that note is so
redeemed.
with respect to each Class A2 note, each period from and
including a quarterly payment date to and excluding the next
quarterly payment date. However, the first and last Interest
Periods for each Class A2 note are as follows:
o first: period from and including the closing date to and
excluding the first quarterly payment date.
o last: period from and including the quarterly payment date
prior to the earlier of the final maturity date and the date on
which that note is redeemed in full to and excluding the
final maturity date or the date on which that note is so
redeemed.
DETERMINATION DATE ............. with respect to a monthly or quarterly payment date, the date
which is 2 business days before that monthly or quarterly
payment date.
QUARTERLY PAYMENT DATE ......... the 7th day or, if the 7th day is not a business day, then the next
business day of each of January, April, July and October. The
first quarterly payment date will be in October 2002.
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MONTHLY PAYMENT DATE .............. the 7th day or, or if the 7th day is not a business day, then the
next business day of each calendar month. The first monthly
payment date will be in August 2002.
EXAMPLE CALENDAR
The following example calendar for a quarter assumes that all relevant days are business days.
COLLECTION PERIOD ................. July 3rd to August 2nd
MONTHLY INTEREST PERIOD ........... July 7th to August 6th
DETERMINATION DATE ................ August 5th
MONTHLY PAYMENT DATE .............. August 7th
COLLECTION PERIOD ................. August 3rd to September 2nd
MONTHLY INTEREST PERIOD ........... August 7th to September 6th
DETERMINATION DATE ................ September 5th
MONTHLY PAYMENT DATE .............. September 7th
COLLECTION PERIOD ................. September 3rd to October 2nd
MONTHLY INTEREST PERIOD ........... September 7th to October 6th
DETERMINATION DATE ................ October 5th
QUARTERLY INTEREST PERIOD ......... July 7th to October 6th
MONTHLY PAYMENT DATE/QUARTERLY
PAYMENT DATE ..................... October 7th
CALCULATION OF INCOME
On each Determination Date, the trust manager will calculate the Income
for the immediately preceding collection period.
INCOME
INCOME for a collection period means all moneys, rights and property which
is received by the issuer trustee during that collection period by way of
interest or otherwise in the nature of income in respect of the authorized
investments, including the housing loans, of the trust including:
o amounts attributable to interest received under fixed-floating rate
swaps and currency swaps;
o interest on income and any other moneys received;
o amounts in the nature of, or attributable to, interest derived under a
mortgage insurance policy or title insurance policy;
o interest and fees received from borrowers under the housing loans; and
o break payments received from mortgage insurers or borrowers under the
housing loans.
APPLICATION OF CAPITAL AND LIQUID AUTHORIZED INVESTMENTS TO AVAILABLE INCOME
The trust manager must ensure that, subject to the paragraph below, the
trust shall have Liquid Authorized Investments at any time not less than 1% of
the A$ Equivalent of the outstanding principal amount of all notes at that
time, or such other percentage as determined by the trust manager and confirmed
by each rating agency. Such amount shall be known as the PRESCRIBED MINIMUM
LEVEL. At closing, the Liquid Authorized Investments will be acquired with the
net proceeds from the sale of the
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notes and will, to the extent necessary, be replenished on each monthly payment
date with Mortgage Principal Repayments to the extent they are available as
described below under "-- Mortgage Principal Repayments".
If the trust manager determines on any Determination Date that the Income
of the trust for the collection period ending immediately prior to that
Determination Date is insufficient to meet the Primary Expenses of the trust
for that collection period, then the trust manager will direct the issuer
trustee to apply, first, the Liquid Authorized Investments and, then, if the
Liquid Authorized Investments are insufficient, the Capital of the trust, to
cover such INCOME SHORTFALL to the extent available.
Income received during a collection period and any Capital and Liquid
Authorized Investments applied as described above will constitute AVAILABLE
INCOME.
DISTRIBUTION OF AVAILABLE INCOME
On each monthly payment date prior to the enforcement of the security
trust deed, based on the calculations, instructions and directions provided to
it by the trust manager on or before the date which is 2 business days before
that monthly payment date, the issuer trustee must pay or cause to be paid out
of the Available Income for the collection period ending immediately before
that monthly payment date, the following amounts, which together constitute the
PRIMARY EXPENSES, in the following order of priority:
o first, an amount equal to the Accrued Interest Adjustment to each
seller;
o second, any taxes payable in relation to the trust;
o third, in the following order of priority, in payment of:
o pro rata:
o the issuer trustee's fee for the Collection Period;
o any fees payable to the note trustee for the Collection Period;
o pro rata:
o any fees payable pro rata to the paying agents for the
Collection Period;
o any fees payable to the calculation agent for the Collection
Period;
o the expenses of the trust -- other than any fees payable to the
issuer trustee, the note trustee, the paying agents, the
calculation agent, the trust manager and the servicer -- in
relation to the Collection Period;
o the expenses of the trust -- other than any fees payable to the
issuer trustee, the note trustee, the paying agents, the
calculation agent, the trust manager and the servicer -- which the
trust manager or the issuer trustee reasonably anticipates will be
incurred prior to the next monthly payment date;
o the expenses of the trust -- other than any fees payable to the
issuer trustee, the note trustee, the paying agents, the
calculation agent, the trust manager and the servicer -- not
covered by the two previous bullet points above which have already
been incurred prior to the monthly payment date but which have not
previously been paid or reimbursed;
o fourth, pro rata:
o the trust manager's fee for the Collection Period; and
o the servicer's fee for the Collection Period;
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o fifth, pro rata:
o any amounts payable to the fixed-floating rate swap provider under
the fixed-floating rate swap other than any break costs in respect
of the termination of the fixed-floating rate swap;
o any interest for the Interest Period ending on that monthly
payment date to the Class A1 noteholders;
o (1) the A$ Interest Amount for that monthly payment date, to the
currency swap provider and any reciprocal payment by the currency
swap provider is thereafter to be applied towards payment of
interest on the Class A2 notes on the related quarterly payment
date, and (2) in the event of the termination of the currency
swap, an A$ amount the trust manager determines in good faith to
be applied on that monthly payment date in order to enable the
issuer trustee to meet its obligations to pay interest on the
Class A2 notes on the related quarterly payment date, to the note
trustee for purchase of U.S. dollars at the prevailing spot
exchange rate in New York City to be applied towards payment of
interest on the Class A2 notes on the related quarterly payment
date; and
o to the currency swap provider, any break costs payable to the
currency swap provider under the currency swap other than in
respect of the termination of the currency swap where the currency
swap provider is the defaulting party, as such term is defined in
the currency swap;
o sixth, any interest for the Interest Period ending on that monthly
payment date to the Class B noteholders; and
o seventh, where any part of Capital has previously been applied by the
issuer trustee to supplement an Income Shortfall, by application by the
issuer trustee for the purposes of replenishment of the assets of the
trust of an amount equal to the amount of Capital so applied.
The issuer trustee shall only make a payment described in any of the
preceding bullet points in this section to the extent that any Available Income
remains from which to make the payment after amounts with priority to that
payment have been fully paid.
ADDITIONAL INCOME PAYMENTS
On each monthly payment date prior to the enforcement of the security
trust deed, based on the calculations, instructions and directions provided to
it by the trust manager, the issuer trustee must pay or cause to be paid out of
any Income for the collection period available after paying the Primary
Expenses referred to above plus the Liquid Authorized Investments.
o first, pro rata any break costs to:
o the fixed-floating rate swap provider in respect of the termination
of the fixed-floating swap; and
o the currency swap provider in respect of the termination of the
currency swap where the currency swap provider is the defaulting
party, as such term is defined in the currency swap;
o second, pro rata any fees payable to the sellers; and
o third, pro rata the balance, if any, to each holder of a residual income
unit.
The issuer trustee shall only make a payment described in any of the
preceding bullet points in this section to the extent that any Income and
Liquid Authorized Investments remain from which to make the payment after
amounts with priority to that payment have been fully paid. Liquid Authorized
Investments may only be used to make a payment described in any of the
preceding bullet points if there is insufficient Income to make the payments in
full and then, only to the extent that the
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application of Liquid Authorized Investments will not reduce the value of the
Liquid Authorized Investments to less than the Prescribed Minimum Level.
INTEREST ON THE NOTES
CALCULATION OF INTEREST PAYABLE ON THE NOTES
Up to, and including, the Step-Up Margin Date, the interest rate for the
Class A2 notes for the related Interest Period will be equal to LIBOR on the
related rate reset date plus a margin of 0.18%. If the issuer trustee has not
redeemed all of the Class A2 notes by the Step-Up Margin Date then the interest
rate for each related Interest Period commencing on or after that date will be
equal to LIBOR on the related rate reset date plus a margin of 0.54%.
The STEP-UP MARGIN DATE means the quarterly payment date falling in July
2009.
Up to, and including, the Step-Up Margin Date, the interest rate for the
Class B notes for a particular Interest Period will be equal to the Bank Bill
Rate on the first day of that Interest Period plus a margin of 0.55%. If the
issuer trustee has not redeemed all of the Class B notes by the Step-Up Margin
Date then the interest rate for a particular Interest Period commencing on or
after that date will be equal to the Bank Bill Rate on the first day of that
Interest Period plus a margin of 1.00%.
The interest rate for the Class A1 notes will be as specified on the date
the Class A1 notes are issued. No Class A1 notes may be issued unless the
rating agencies have confirmed that the issue of the Class A1 notes will not
result in a reduction or withdrawal of the rating of any note outstanding.
With respect to any monthly payment date or quarterly payment date,
interest on the notes will be calculated as the product of:
o the outstanding principal amount of such class as of the first day of
the applicable Interest Period, after giving effect to any payments of
principal made or to be made with respect to such class on such day; and
o the interest rate for such class of notes; and
o a fraction, the numerator of which is the actual number of days in the
applicable Interest Period and the denominator of which is 360 days for
the Class A2 notes, or 365 days for the A$ Interest Amount, the Class A1
notes and the Class B notes.
A note will bear interest until the date that note is finally redeemed.
See "-- Final Redemption of Notes" below.
CALCULATION OF LIBOR
On the second banking day in London and New York before the beginning of
each Interest Period, the calculation agent will determine LIBOR for the next
Interest Period. This will be the rate reset date.
PUBLICATION OF INTEREST RATE
The principal paying agent shall publish the interest rate for each
Interest Period and when applicable, any increase in the applicable margin, the
amount payable in respect of each Class A2 note for such Interest Period and
the relevant interest quarterly payment date in accordance with the notice
provisions set forth under the heading "-- Notices" and inform the Luxembourg
Stock Exchange as soon as possible after the determination of such rates,
amounts and date. It is expected that publication will be made on or before the
relevant quarterly payment date.
MORTGAGE PRINCIPAL REPAYMENTS
On each Determination Date, the trust manager must determine the Mortgage
Principal Repayments for the collection period ending immediately prior to that
Determination Date.
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MORTGAGE PRINCIPAL REPAYMENTS for a collection period are all amounts
received by the issuer trustee during that collection period in connection with
a housing loan or mortgage securing that housing loan which are:
o in respect of the repayment of any part of the principal outstanding
under the housing loan;
o any net receipts of a principal or capital nature received in respect of
any enforcement or recovery proceedings in respect of the housing loan
or mortgage securing that housing loan;
o any net receipts of a principal or capital nature received under a
mortgage insurance policy or title insurance policy in respect of the
housing loan or mortgage securing that housing loan; and
o any other amount received on, under or in relation to the housing loan
or mortgage securing that housing loan and which is not Income.
In addition, on the first quarterly payment date which is three months
after the closing date, the balance of the prefunding account that has not been
used to acquire or originate additional housing loans will be applied as
Mortgage Principal Repayments as described below. See "Acquisition of Housing
Loans after the Closing Date".
PRINCIPAL DISTRIBUTIONS
On each monthly payment date 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 monthly payment date, and
any Surplus Liquidity for the corresponding monthly payment date, the following
amounts in the following order of priority:
o first, to make up any Income Shortfall. See "-- Application of Capital
and Liquid Authorized Investments to Available Income" above;
o second, to Class A1 noteholders in payment of the Principal Amount of
the Class A1 Notes until such time as the Class A1 notes have been
redeemed in full;
o third, an amount not to exceed the A$ Equivalent of the Currency Swap
Notional Amount (1) prior to the termination of the currency swap, to
the currency swap provider in payment of, for that monthly payment date,
and any reciprocal payment by the currency swap provider is thereafter
to be applied towards payment of the Principal Amount of the Class A2
notes on the related quarterly payment date, and (2) in the event of the
termination of the currency swap, to the note trustee for purchase of
U.S. dollars at the spot exchange rate in New York City, to be applied
towards payment of the Principal Amount of the Class A2 Notes on the
related quarterly payment date, in each case until such time as all
Class A2 notes have been redeemed in full;
o fourth, to Class B noteholders in payment of the Principal Amount of the
Class B notes until such time as the Class B notes have been redeemed in
full; and
o fifth, the balance, if any, as a distribution to the holder of the
residual capital unit.
The issuer trustee 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 Surplus Liquidity remain from which to make the
payment after amounts with priority to that payment have been fully paid.
LIQUIDITY PURPOSES includes:
o the provision by the issuer trustee of redraws in the manner described
under "Interstar Residential Loan Program -- Special Features of the
Housing Loans -- Redraws" above;
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o the provision by the issuer trustee of advances to borrowers under
housing loans which provide for a line of credit facility or revolving
credit facility; and
o replenishing Liquid Authorized Investments to maintain the Prescribed
Minimum Level. See "-- Application of Capital and Liquid Authorized
Investments to Available Income".
PAYMENTS INTO US$ ACCOUNT
The principal paying agent shall open and maintain a US$ account into
which the currency swap provider shall deposit on each quarterly payment date
amounts denominated in US$. The issuer trustee shall direct the currency swap
provider to pay all amounts denominated in US$ payable to the issuer trustee by
the currency swap provider under the currency swap into the US$ account or to
the principal paying agent on behalf of the issuer trustee. If any of the
issuer trustee, the trust manager or the servicer receives any amount
denominated in US$ from the currency swap provider under the currency swap,
they will also promptly pay that amount to the credit of the US$ account.
PAYMENTS OUT OF US$ ACCOUNT
At the direction of the trust manager, the issuer trustee shall, or shall
require that the principal paying agent, on behalf of the issuer trustee,
distribute the following amounts from the US$ account in accordance with the
note trust deed and the agency agreement on each quarterly payment date pro
rata between the relevant notes and to the extent payments relating to the
following amounts were made to the currency swap provider:
o interest on the Class A2 notes;
o principal on the Class A2 notes, until their outstanding principal
balance is reduced to zero.
NOTICES
As long as the Class A2 notes are listed on the Luxembourg Stock Exchange,
all notices relating to the Class A2 notes will, unless otherwise provided for
by law or as provided in the following paragraph, be validly given if published
in a leading newspaper having general circulation in the Grand Duchy of
Luxembourg (which is expected to be the Luxembourg Wort); provided, however,
that publishing such notices will not discharge any party's obligation to
provide notices in any other way or to any person under the transaction
documents, any fixed-floating rate swap or the currency swap. If publication in
such manner is impracticable, notice will be published in a daily newspaper
with general circulation in Europe. Notice will be deemed to have been given on
the date of the first publication.
Any notice to Class A2 noteholders specifying a quarterly payment date, an
interest rate, interest payable, a principal payment -- or the absence of a
principal payment -- and the Principal Amount of the Class A2 notes after
giving effect to such payment, will be deemed to have been properly given if
the information contained in the notice appears on the relevant page of the
Reuters Screen or the electronic information system made available to its
subscribers by Bloomberg, L.P. or any other similar electronic reporting
service as may be approved by the note trustee in writing and notified to Class
A2 noteholders and, for as long as the Class A2 notes are listed on the
Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange so
require, if a copy of the notice is made available at the offices of the
Luxembourg Paying Agent at The Bank of New York (Luxembourg) S.A. Aerogolf
Center IA, Hoehenhof L-1736 Senningerberg Luxembourg and sent to the Luxembourg
Stock Exchange. This notice will be considered to have been given on the first
date on which it appears on the relevant electronic reporting service. If it is
impossible or impracticable to give notice as stated in this paragraph, then
notice of the matters discussed in this paragraph will be given in the manner
stated in the paragraph above.
THE FIXED-FLOATING RATE SWAP
The issuer trustee will in the future enter into a swap governed by an
ISDA Master Agreement, as amended by a supplementary schedule and confirmed by
a written confirmation, with the fixed-floating
64
rate swap provider, if any fixed-rate housing loans are added to the housing
loan pool or if a borrower converts a floating rate loan to a fixed rate loan,
to hedge the basis risk between the interest rate on the fixed rate housing
loans and the floating rate obligations of the trust, including the interest
due on the notes. The fixed-floating rate swap will cover the housing loans
which bear a fixed rate of interest as of the applicable cut-off date and those
variable rate housing loans which at a later date convert to a fixed rate of
interest.
The issuer trustee will pay the fixed-floating rate swap provider on each
monthly payment date an amount calculated by reference to the applicable fixed
rate on the housing loans which are subject to a fixed rate of interest. The
issuer trustee will also pay the fixed-floating rate swap provider all break
fees from borrowers with fixed rate loans received during the related
collection period.
The issuer trustee will receive from the fixed-floating rate swap provider
on each monthly payment date an amount calculated by reference to the Bank Bill
Rate.
The terms of the fixed-floating rate swap allow for netting of swap
payments for transactions under the one confirmation.
FIXED-FLOATING RATE SWAP DOWNGRADE
If the fixed-floating rate swap provider's rating falls below:
o a short term credit rating of A-1 by S&P; or
o a long term credit rating of A2 or a short term credit rating of P-1 by
Moody's,
the fixed-floating rate swap provider must:
o at its cost, novate its obligations to a replacement fixed-floating rate
swap provider with a short term credit rating of at least A-1 by S&P and
a short term credit rating of P-1 by Moody's and a long term credit
rating of at least A2 by Moody's; or
o if the fixed-floating rate swap is not novated within 30 days of the
downgrade, cash collateralize its obligations.
Where the fixed-floating rate swap provider must comply with bullet point
2 above, it will, at its own cost, deposit into a swap collateral account
sufficient funds to ensure that the amount standing to the credit of that
account is equal to the greater of the following -- unless otherwise agreed by
the rating agencies:
o an amount sufficient to maintain the rating of the 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 at that time.
TERMINATION BY THE FIXED-FLOATING RATE SWAP PROVIDER
The fixed-floating rate swap provider will have the right to terminate the
fixed-floating rate swap in the following circumstances:
o the issuer trustee fails to make a payment under the fixed-floating
rate swap within 10 business days after notice of failure is given to
the 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
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o an event of default has occurred and the security trustee has
exercised its rights to enforce the charge under the security trust
deed.
The issuer trustee will have the right to terminate the fixed-floating
rate swap in the following circumstances:
o the fixed-floating rate swap provider fails to make a payment under a
swap within 10 business days after notice of failure is given to the
issuer trustee;
o if due to a change in law it becomes illegal for either party to make
or receive payments, perform its obligations or comply with any
material provision of the fixed-floating rate swap; or
o an Insolvency Event has occurred with respect to the fixed-floating
rate swap provider.
THE CURRENCY SWAP AND CURRENCY SWAP GUARANTEE
Collections on the housing loans and payments to the issuer trustee under
the fixed-floating rate swap will be denominated in Australian dollars. The
payments to the issuer trustee under the fixed-floating rate swap will be
calculated by reference to the Bank Bill Rate. However, the payment obligations
of the issuer trustee on the Class A2 notes are denominated in U.S. dollars and
the Class A2 Notes bear interest at a rate calculated by reference to LIBOR. To
hedge its interest rate and currency exposures, the issuer trustee will enter
into a swap agreement with the currency swap provider. Under a currency swap
guarantee dated as of March 26, 2001, the currency swap guarantor will
guarantee to the issuer trustee the payment obligations of the currency swap
provider under the currency swap. The currency swap will be governed by the
laws of the State of New South Wales. The currency swap guarantee is governed
by the laws of the State of New York.
The currency swap will be governed by a standard form ISDA Master
Agreement, as amended by a supplementary schedule and confirmed by a written
confirmation relating to the Class A2 notes.
Under the currency swap, the issuer trustee will pay to the currency swap
provider on each monthly payment date an amount in Australian dollars equal to
the lesser of (1) the Mortgage Principal Repayments -- except to the extent
applied or retained for Liquidity Purposes -- and any Surplus Liquidity
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) the A$ Equivalent of the Currency Swap Notional Amount for
that monthly payment date, and the currency swap provider will pay directly to
the US$ account of the principal paying agent on the related quarterly payment
date an amount denominated in United States dollars which is equivalent to such
Australian dollar payment. The equivalent United States dollar payment will be
calculated using an exchange rate of US$0.5580=A$1.00, which is fixed for the
term of the currency swap.
In addition, under the currency swap on each monthly payment date the
issuer trustee will pay to the currency swap provider the A$ Interest Amount
for that monthly payment date and the currency swap provider will pay directly
to the US$ account of the principal paying agent on the related quarterly
payment date an amount equal to the interest payable in US$ to the Class A2
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 the currency swap. However, the issuer trustee will not be
required to pay grossed-up amounts to the currency swap provider under the
currency swap.
If on any monthly payment date the issuer trustee does not or is unable to
make the full floating rate payment, the US$ floating rate quarterly payment to
be made by the currency swap provider with respect to such Australian dollar
floating rate monthly payment will be reduced by the same relative proportion
as the reduction in such payment from the issuer trustee.
The purchase price for the Class A2 notes will be paid by investors in
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
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proceeds of the issue of the Class A2 notes in U.S. dollars. In return the
issuer trustee will be paid by the currency swap provider the A$ Equivalent of
that U.S. dollar amount.
TERMINATION BY THE CURRENCY SWAP PROVIDER
The currency swap provider shall have the right to terminate the currency
swap in the following circumstances:
o if the issuer trustee fails to make a payment under the currency swap
within ten business days of its due date;
o an Insolvency Event with respect to the issuer trustee occurs or the
issuer trustee merges into another entity without that entity properly
assuming responsibility for the obligations of the issuer trustee under
the currency swap;
o if due to a change in law it becomes illegal for either party to make or
receive payments or comply with any other material provision of the
currency swap. The currency swap requires such party to make efforts to
transfer its rights and obligations to another office or another
affiliate to avoid this illegality, so long as the transfer would not
result in a downgrade or withdrawal of the rating of the notes. If those
efforts are not successful, then the currency swap provider will have
the right to terminate the currency swap. These provisions relating to
termination following an illegality have been modified so that they are
not triggered by the introduction of certain exchange controls by any
Australian government body;
o if the issuer trustee becomes obligated to make a withholding or
deduction in respect of the Class A2 notes or in respect of payments
under the currency swap or borrowers under the housing loans become
obliged to make a withholding or deduction in respect of payments under
the housing loans and the Class A2 notes are redeemed as a result. See
"-- Redemption of Notes for Taxation or Other Reasons" below; or
o 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 currency swap. In each of these cases it is only
permitted to exercise that right with the prior written consent of the note
trustee:
o where the currency swap provider fails to make a payment under the
currency swap within ten business days of its due date or the currency
swap provider becomes insolvent or merges into another entity without
that entity properly assuming responsibility for the obligations of the
currency swap provider under the currency swap;
o if due to a change in law it becomes illegal for either party to make or
receive payments or comply with any other material provision of the
currency swap. The currency swap requires such party to make efforts to
transfer its rights and obligations to another office or another
affiliate to avoid this illegality, so long as the transfer would not
result in a downgrade or withdrawal of the rating of the notes. If those
efforts are not successful, then the issuer trustee will have the right
to terminate. These provisions relating to termination following an
illegality have been modified so that they are not triggered by the
introduction of certain exchange controls by any Australian government
body;
o if the issuer trustee becomes obligated to make a withholding or
deduction in respect of the Class A2 notes or in respect of payments
under the currency swap or borrowers under the housing loans become
obliged to make a withholding or deduction in respect of payments under
the housing loans and the Class A2 notes are redeemed as a result. See
"-- Redemption of Notes for Taxation or Other Reasons" below; or
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o after a currency swap downgrade, if the currency swap provider breaches
its obligation to deposit cash collateral with the issuer trustee or to
transfer the currency swap to a replacement currency swap provider or to
enter into another arrangement required by the rating agencies in
accordance with the currency swap.
The issuer trustee may only terminate the currency swap with the prior
written consent of the note trustee. Each party may terminate the currency swap
only after consulting with the other party as to the timing of the termination.
The issuer trustee will exercise such right to terminate at the direction of
the trust manager.
CURRENCY SWAP DOWNGRADE
If, as a result of the withdrawal or downgrade of its credit rating by any
rating agency, the currency swap guarantor does not have a short term credit
rating of A-1+ and a long term credit rating of at least AA- by S&P and a long
term credit rating of at least A2 and a short term credit rating of P-1 by
Moody's, the currency swap provider must within:
o 30 business days of a downgrade of the currency swap guarantor's short
term credit rating by S&P to not lower than A-1 or the downgrade of its
long term credit rating by Moody's to not lower than A3; or
o 5 business days of any other such withdrawal or downgrade,
or, in either case, such greater period as is agreed to in writing by the
relevant rating agency, at the currency swap provider's cost:
o in the situation described in bullet point one above only, lodge a swap
collateral amount in US$ with an Approved Bank in the United States of
America, which may be invested by the issuer trustee at the direction of
the trust manager in United States dollar eligible investments, as
provided in the currency swap; or
o procure, from a replacement currency swap guarantor with a credit rating
not less than A-1+ (short term) and AA- (long term) from S&P and P-1
(short term) and A2 (long term) from Moody's, a guarantee to honor the
currency swap provider's obligations under the 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.
Any principal amount paid to the currency swap provider during the Interest
Period for the Class A2 notes in which the downgrade occurred will be deposited
within 5 business days of the downgrade in an account in the name of the issuer
trustee with an Approved Bank in Australia. Following the downgrade of the
currency swap guarantor and for so long as that downgrade is sustained, all
interest and principal payments which would have been payable by the issuer
trustee to the currency swap provider under the currency swap will be deposited
in Australian dollars in an account in the name of the issuer trustee with an
Approved Bank in Australia. Interest and principal payments on deposit with
such an Approved Bank may be invested by the issuer trustee in Liquid
Authorized Investments. Any income arising from such investments will be for
the account of the currency swap provider. On each quarterly payment date, the
issuer trustee will pay the balance of the A$ account to the currency swap
provider in exchange for the US$ amount payable by the currency swap provider
on that date to the issuer trustee under the currency swap.
TERMINATION PAYMENTS
On the date of termination of the currency swap, a termination payment
will be due from the issuer trustee to the currency swap provider or from the
currency swap provider to the issuer trustee. The termination of the currency
swap where a replacement currency swap, on terms that will not lead to a
withdrawal or downgrade of the then current rating assigned by either rating
agency to the notes, is not put in place, is an event of default under the
security trust deed.
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The termination payment in respect of a currency swap will be determined
on the basis of quotations from four leading dealers in the relevant market
selected by the currency swap provider to enter into a replacement transaction
that would have the effect of preserving the economic equivalent of any payment
that would, but for the early termination, have been required under the terms
of the currency swap.
REPLACEMENT OF THE CURRENCY SWAP
If the currency swap is terminated, the issuer trustee must, at the
direction of the trust manager, enter into one or more replacement currency
swaps which replace the currency swap, but only on the conditions that:
o the termination payment, if any, which is payable by the issuer trustee
to the currency swap provider on termination of the currency swap will
be paid in full when due in accordance with the series notice and the
currency swap;
o the then current ratings assigned to the notes by either rating agency
will not be withdrawn or downgraded; and
o the liability of the issuer trustee under that replacement currency swap
is limited to at least the same extent that its liability is limited
under the currency swap.
If the preceding conditions are satisfied, the issuer trustee must, at the
direction of the trust manager, enter into the replacement currency swap, and
if it does so it must direct the provider of the replacement currency swap to
pay any up-front premium to enter into the replacement currency swap due to the
issuer trustee directly to the currency swap provider in satisfaction of and to
the extent of the issuer trustee's obligation to pay the termination payment to
the currency swap provider. To the extent that such premium is not greater than
or equal to the termination payment, the balance must be paid by the issuer
trustee as an expense of the trust.
CURRENCY SWAP PROVIDER
The currency swap provider will be Zurich Capital Markets Australia
Limited (ZCMAL).
ZURICH CAPITAL MARKETS AUSTRALIA LIMITED
ZCMAL is a limited liability company incorporated in Australia with its
principal place of business at Level 47, 2 Park Street, Sydney NSW 2000 (ABN
99095 545 887). It is a wholly owned indirect subsidiary of Zurich Financial
Services (ZFS). ZCMAL manages operations throughout the Asian region to develop
capital markets and banking operations for Zurich Capital Markets (ZCM), a
subsidiary of ZFS.
As of December 31, 2001, based on audited Australian GAAP financial
statements, ZCMAL had total assets of A$123,680,000, total liabilities of
A$107,527,000 and shareholders' funds of A$16,153,000. Australian GAAP
financial statements may not conform to generally accepted accounting
principles applied by United States companies.
As of July 10, 2002 ZCMAL had a long-term rating of A1 from Moody's and
AA- from S&P. These ratings are supported by the following:
o a guarantee dated as of March 26, 2001 by ZCM Matched Funding Corp. in
favor of ZCMAL and any person specified in the guarantee entitled to
payment or performance by ZCMAL;
o a guarantee dated as of June 21, 2001 by ZFS and Zurich Group Holding in
favor of ZCM Matched Funding Corp., Zurich Capital Markets Inc, Zurich
Bank and ZCMA and any person in the guarantee entitled to payment or
performance by the guarantors; and
o a surety bond dated as of August 6, 1997 by Zurich Insurance Company in
favor of ZCM Matched Funding Corp. and any person specified in the
surety bond entitled to payment or performance by ZCM Matched Funding
Corp. under a "Financial Products Instrument" (as
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described in the surety bond), including ZCM Matched Funding Corp.'s
obligations under the March 26, 2001 guarantee and under any interest
rate or currency derivatives. The surety bond, among other things,
requires Zurich Insurance Company (ZIC) to cause ZCM Matched Funding
Corp. to maintain a net worth of at least US$10 million at all times. The
obligations of Zurich Insurance Company under this surety bond are
limited to US$3 billion.
CURRENCY SWAP GUARANTOR
ZCM MATCHED FUNDING CORP.
ZCM Matched Funding Corp. (ZCMMF) is a limited liability company
incorporated in the State of Delaware. It is a wholly-owned, indirect
subsidiary of ZFS. Its principal registered office is Trust Centre, 1209 Orange
Street, Wilmington, Delaware, USA and its business address is One Chase
Manhattan Plaza, 44th Floor, New York, NY 10005, USA. It conducts various
financial transactions for ZFS and its subsidiaries, including raising funding
for the Zurich Financial Services Group and providing structured products for
ZCM's clients.
As of December 31, 2001, based on audited US GAAP financial statements,
ZCMMF had total assets of US$3,918,407,545, total liabilities of
US$3,781,766,848 and shareholders' equity of US$136,640,697. ZCMMF is a wholly
owned subsidiary of ZFS. ZCMMF's share capital consists of 1,000 shares each
having a par value of one cent.
As of July 10, 2002 ZCMMF had a long-term rating of A1 from Moody's and
AA- from S&P and a short-term rating of P-1 from Moody's and A-1+ from S&P.
ZURICH FINANCIAL SERVICES
ZFS is the parent company of the Zurich Financial Services Group (the
GROUP). The Group provides customer solutions in the areas of financial
protection (non-life insurance and structured solutions) and asset gathering
(life insurance and asset management). The Group focuses its activities on its
markets in North America, the United Kingdom and continental Europe. Founded in
1872, ZFS is a limited liability corporation headquartered in Zurich,
Switzerland. The Group has offices in more than 60 countries and employs
approximately 70,000 people.
As of December 31, 2001, based on audited International Accounting
Standard financial statements, ZFS had total assets of US$231,605 million,
total liabilities of US$210,885 million, shareholders' equity of US$17,742
million and minority interests of US$2,978 million. International Accounting
Standards may not conform to generally accepted accounting principles applied
by United States companies. On May 16, 2002, the Board of Directors of ZFS
appointed a new Chief Executive Officer after the resignation of its former
Chairman, who served on the Board of Directors for nearly 40 years.
ZFS directly and indirectly owns 100% of the issued share capital of
Zurich Group Holding (ZGH). ZGH is the holding company of the Zurich Group, a
leading multinational insurance and financial services group, which comprises
ZIC and its subsidiaries. ZGH directly owns 100% of the issued share capital of
ZIC.
ZIC is a limited liability corporation incorporated in Switzerland. ZIC
operates mainly in two capacities, firstly as a non-life insurer and reinsurer,
operating through branch offices in Switzerland and other countries and
secondly, as the holding company of its subsidiaries.
ZIC is an insurance company regulated under the laws of Switzerland. Under
Swiss law an insurance policyholder ranks above other unsecured creditors of
that insurance company. The surety bond, dated as of August 6, 1997, in favor
of ZCMMF is structured as an insurance policy. Persons specified in the surety
bond entitled to payment or performance by ZCMMF under certain agreements,
including the March 26, 2001 guarantee, are treated as beneficiaries of an
insurance policy and as a result rank equally with the insurance policyholders
of ZIC.
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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 or substitute guarantee (as the case may
be);
o refunding to that swap provider or the currency swap guarantor
(whichever provided the swap collateral amount) 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 the
currency swap,
any amount for or on account of any present or future taxes, duties,
assessments or governmental charges of whatever nature imposed, levied,
collected, withheld or assessed by any government agency, or
o a government agency requires the deduction or withholding from payments
by borrowers under the housing loans of any amount for or on account of
any taxes, duties, assessments or governmental charges of whatever
nature imposed, levied, collected, withheld or assessed by that
government agency,
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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 quarterly payment date to
discharge, and the trust manager will so certify to the issuer trustee and the
note trustee, all its liabilities in respect of the notes and any amounts
required under the security trust deed to be paid in priority to or equal with
the notes, redeem all, but not some, of the notes at their outstanding
principal amount, together with accrued interest to the date of redemption on
any subsequent quarterly payment date. Noteholders must be given notice of a
redemption not more than 60 nor less than 45 days prior to the date of
redemption.
AT THE OPTION OF THE TRUST MANAGER
If the trust manager satisfies the issuer trustee and the note trustee,
immediately prior to giving the notice to the noteholders as described in this
section, that on the next quarterly payment date the currency swap provider
would be required to deduct or withhold from any payment under the currency
swap any amount for or on account of any present or future taxes, duties,
assessments or governmental charges of whatever nature imposed, levied,
collected, withheld or assessed by any government agency, then the issuer
trustee must, when so directed by the trust manager, in its sole discretion,
provided that the issuer trustee will be in a position on such payment date to
discharge, and the trust manager will so certify to the issuer trustee and the
note trustee, all its liabilities in respect of the notes and any amounts
required under the security trust deed to be paid in priority to or equal with
the notes, redeem all, but not some, of the notes at their outstanding
principal amount, together with accrued interest to the date of redemption on
any subsequent quarterly payment date. Noteholders must be given notice of a
redemption not more than 60 nor less than 45 days prior to the date of
redemption.
REDEMPTION OF THE NOTES UPON AN EVENT OF DEFAULT
If an event of default occurs under the security trust deed while the
Class A2 notes or Class B notes are outstanding, the security trustee may,
subject in some circumstances to the prior written consent of the Noteholder
Mortgagees in accordance with the provisions of the security trust deed, and
will, if so directed by the Noteholder Mortgagees where they are the only
Voting Mortgagees, or, otherwise by a resolution of 75% of the Voting
Mortgagees, enforce the security created by the security trust deed. That
enforcement can include the sale of some or all of the housing loans. If the
trust terminates while notes are outstanding, each seller has a right of first
refusal to acquire the housing loans. Any proceeds from the enforcement of the
security will be applied in accordance with the order of priority of payments
as set out in the security trust deed. See "Description of the Transaction
Documents -- The Security Trust Deed".
OPTIONAL REDEMPTION OF THE NOTES
ON STEP-UP MARGIN DATE
At the trust manager's direction, to be given not later than 2 business
days before the relevant quarterly payment date, the issuer trustee must redeem
all of the notes in a class by repaying the outstanding principal amount of the
notes in that class, together with accrued interest to, but excluding, the date
of redemption, on any quarterly payment date falling on or after the Step-Up
Margin Date, being the July 2009 quarterly payment date, provided that:
o the trust manager has provided to:
o each relevant noteholder, 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 quarterly 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 quarterly payment date falling in
July 2034.
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;
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o the quarterly payment date immediately following the date on which the
issuer trustee completes a sale and realization of all of the assets of
the trust in accordance with the master trust deed and the series
notice;
o the date on which all of the principal of the notes are repaid in
accordance with "-- Principal Distributions" described above;
o the date on which the notes are redeemed for taxation or other reasons;
and
o the date on which optional redemption of the notes is exercised.
TERMINATION OF THE TRUST
TERMINATION EVENTS
The trust shall continue until, and shall terminate on the later of:
o the Termination Date; and
o the date on which the assets of the trust have been sold or realized,
which shall be within 180 days after the Termination Date so far as
reasonably practicable and reasonably commercially viable.
REALIZATION OF TRUST ASSETS
On the Termination Date, subject to each seller's right of first refusal,
the issuer trustee must sell and realize the assets of the trust within 180
days. During the 180-day period, performing housing loans may not be sold for
less than their Unpaid Balance, and non-performing housing loans may not be
sold for less than the fair market value of such housing loans and their
related security, as agreed upon by the issuer trustee, based on appropriate
expert advice, and the seller; provided that the issuer trustee may not sell
any performing housing loan within the 180-day period for less than its fair
market value without the consent of the holders of 75% of the aggregate
outstanding principal amount of the notes. The trust manager will determine
whether a housing loan is performing or non-performing.
SELLERS' RIGHT OF FIRST REFUSAL
As soon as practical after the Termination Date, the trust manager will
direct the issuer trustee to offer to assign to each seller, its entire right,
title and interest in and to the housing loans sold by it for their Unpaid
Balance, for performing housing loans, and their fair market value, for
non-performing housing loans; provided that, if the fair market value of a
housing loan is less than its Unpaid Balance, the sale requires the consent of
the holders of 75% of the aggregate outstanding principal amount of the notes.
The issuer trustee is not entitled to sell any housing loans unless the
relevant seller has failed to accept the offer made to it within 180 days after
the occurrence of the Termination Date by paying to the issuer trustee the
purchase price.
DISTRIBUTION OF PROCEEDS FROM REALIZATION OF TRUST ASSETS
After deducting expenses, the trust manager shall direct the issuer
trustee to distribute the proceeds of realization of the assets of the trust in
accordance with the cashflow allocation methodology set out in "-- Distribution
of Available Income" and "-- Principal Distributions", and in accordance with
any directions given to it by the trust manager. If all of the notes have been
fully redeemed and the trust's other creditors have been paid in full, the
issuer trustee shall distribute the assets of the trust to the residual
beneficiary.
PRESCRIPTION
A note will be void in its entirety if not surrendered for payment within
ten years of the relevant date in respect of any payment on the note, the
effect of which would be to reduce the principal amount of such note to zero.
The relevant date is the date on which a payment first becomes due but, if the
full amount of the money payable has not been received in New York City by the
principal paying agent or the note trustee on or prior to that date, it means
the date on which the full amount of such money having been so received and
notice to that effect is duly given in accordance with the terms of the
relevant note. After the date on which a note becomes void in its entirety, no
claim may be made in respect of it.
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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 the Class A2 notes for the interest period ending
on the day before the next quarterly payment date;
o the scheduled and unscheduled payments of principal on the housing loans
during the collection period;
o the aggregate of the outstanding balances of the housing loans as at the
last day of the collection period; and
o delinquency and loss statistics with respect to the housing loans during
the collection period.
Unless and until definitive notes are issued, beneficial owners will
receive noteholders' reports and other information provided for under the
transaction documents only if, when and to the extent provided by DTC and its
participating organizations.
Unless and until definitive notes are issued, quarterly and annual
unaudited reports containing information concerning the trust and the Class A2
notes will be prepared by the trust manager and sent to DTC. DTC and its
participants will make such reports available to holders of interests in the
Class A2 notes in accordance with the rules, regulations and procedures
creating and affecting DTC. However, such reports will not be sent directly to
each beneficial owner while the Class A2 notes are in book-entry form. Upon the
issuance of fully registered, certificated notes, such reports will be sent
directly to each Class A2 noteholder. Such reports will not constitute
financial statements prepared in accordance with generally accepted accounting
principles. The trust manager will file with the SEC such 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
2003.
VOTING AND CONSENT OF NOTEHOLDERS
The note trustee is not bound to:
o vote under the security trust deed;
o direct the security trustee to enforce the security under the security
trust deed; or
o otherwise take any proceedings, actions or steps pursuant to or in
connection with the security trust deed, the note trust deed or the
Class A2 notes, unless the note trustee is directed or requested to do
so by noteholders of at least 75% of the outstanding Principal Amount of
the Class A2 notes.
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DESCRIPTION OF THE TRANSACTION DOCUMENTS
The following summary, together with the information above under the
heading "Description of the Class A2 Notes", describes the material terms of
the master trust deed, the series notice, the note trust deed, the security
trust deed, the agency agreement, the investment management agreement, the
primary backup servicer agreement and the secondary backup servicer agreement
(collectively the TRANSACTION DOCUMENTS). The summary does not purport to be
complete and is subject to the provisions of the transaction documents. All of
the transaction documents, except for the note trust deed, the primary backup
servicer agreement and the secondary backup servicer agreement, are governed by
the laws of the State of New South Wales, Australia. The note trust deed is
governed by the laws of the State of New South Wales, Australia and the
administration of the trust is governed by New York law. The primary backup
servicer agreement and the secondary backup servicer agreement are governed by
the laws of the State of Victoria, Australia. A copy of the master trust deed
and the investment management agreement and a form of each of the other
transaction documents have been filed as exhibits to the registration statement
of which this prospectus is a part.
TRUST ACCOUNTS
The issuer trustee will establish and maintain the collection account with
an Approved Bank. The collection account will initially be established with
National Australia Bank Limited, which has a short term rating of P-1 from
Moody's and A-1+ from S&P. The bank account shall be opened by the issuer
trustee in its name and in its capacity as trustee of the trust. This account
will not be used for any purpose other than for the trust.
The trust manager shall have the discretion and duty to recommend to the
issuer trustee, in writing, the manner in which any moneys forming part of the
trust shall be invested in Authorized Investments and what purchases, sales,
transfers, exchanges, collections, realizations or alterations of assets of the
trust shall be effected and when and how the same should be effected.
MODIFICATIONS
The issuer trustee, the trust manager and the servicer, with respect to
the master trust deed, the series notice and the investment management
agreement, after giving notice to the rating agencies, or the note trustee, the
trust manager and the issuer trustee with respect to the note trust deed or any
other transaction document, may by way of supplemental deed alter, add to or
modify the master trust deed, the series notice, the note trust deed or any
other transaction document so long as such alteration, addition or modification
was effected upon -- in the case of the master trust deed or the series notice
- -- the consent of the noteholders or residual beneficiary or -- in the case of
the note trust deed -- the consent of the Class A2 noteholders as described in
the following paragraph or is:
o to correct a manifest error or ambiguity or is of a formal, technical or
administrative nature only;
o necessary to comply with the provisions of any law or regulation or with
the requirements of any Australian governmental agency;
o appropriate or expedient as a consequence of an amendment to any law or
regulation or altered requirements of the government of any
jurisdiction, any department, commission, office of any government or
any corporation owned or controlled by any government, including,
without limitation, an alteration, addition or modification which is
appropriate or expedient as a consequence of the enactment of a statute
or regulation or an 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 swap.
The issuer trustee must act honestly and in good faith in performance of
its duties and in exercising its discretions under the master trust deed, use
its best endeavors to carry on and conduct its business in so far as it relates
to the master trust deed in a proper and efficient manner and to exercise such
diligence and prudence as a prudent person of business would exercise in
performing its express functions and in exercising its discretions under the
master trust deed.
DELEGATION
In exercising its powers and performing its obligations and duties under
the master trust deed, the issuer trustee may, with the approval of the trust
manager, delegate any or all of the duties, powers, discretion or other
functions of the issuer trustee.
TRUST INDENTURE ACT OF 1939
Under the note trust deed, the issuer trustee, or the trust manager on its
behalf, must deliver to the note trustee, within 120 days after the end of each
fiscal year of the trust, commencing on September 30, 2003, and otherwise in
compliance with the requirements of section 314(a)(4) of the United States
Trust Indenture Act of 1939, a certificate stating that:
o a review of the activities of the issuer trustee in respect of the trust
during such year and of performance under the transaction documents, any
fixed floating rate swap and the currency swap, 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
swap, throughout the relevant year, or, if there has been a default in
the compliance of any such condition or covenant, specifying each such
default known to that person of the nature and status of the default.
The issuer trustee, or the trust manager, on its behalf, must deliver to
the note trustee on the closing date, an opinion stating that the security
trust deed and any other requisite documents have been properly recorded and
filed. Within 120 days after the end of each fiscal year commencing on
September 30, 2003, the issuer trustee, or the trust manager, on its behalf,
must deliver an opinion stating that action has been taken with respect to the
recording and filing of the security trust deed and any other requisite
document or that no action is required to maintain the security interest
created by the security trust deed.
ISSUER TRUSTEE AND SECURITY TRUSTEE FEES AND EXPENSES
The issuer trustee and the security trustee are collectively entitled to a
fee for each collection period equal to 0.0605% per annum of the aggregate
outstanding principal amount of the notes on the first day of each collection
period payable in arrears on the next monthly payment date.
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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 swap, 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 swap, 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 swap, 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 swap, or the trust.
No noteholder nor any party to any transaction document, any
fixed-floating rate swap and the currency swap, may sue the issuer trustee in
any capacity other than as trustee of the trust or seek the appointment of a
receiver -- except in relation to the assets of the trust -- liquidator,
administrator or similar person to the issuer trustee or prove in any
liquidation, administration or arrangements of or affecting the issuer trustee
- -- except in relation to the assets of the trust.
The other paragraphs in this section do not apply to any obligation or
liability of the issuer trustee to the extent that it is not satisfied because
under a transaction document, any fixed-floating rate swap and the currency
swap, or by operation of law there is a reduction in the extent of the issuer
trustee's indemnification out of the assets of the trust as a result of the
issuer trustee's fraud, negligence, or wilful default.
Each of the trust manager, the servicer, the calculation agent, the paying
agents and the swap providers are responsible under the transaction documents
for performing a variety of obligations
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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 swap, 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 swap -- 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, any fixed-floating rate swap and
the currency swap transaction documents -- 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 swap in relation to the trust
except to the extent that such losses and liabilities arose as a result of the
issuer trustee's fraud, negligence or wilful default.
The issuer trustee is indemnified out of the assets of the trust against
certain payments it may be liable to make under any Consumer Credit
Legislation. The trust manager also indemnifies the issuer trustee in relation
to such payments and the issuer trustee is required to first call on the
indemnity from the trust manager before calling on the indemnity from the
assets of the trust.
THE TRUST MANAGER
POWERS
The trust manager will have full and complete powers of management of the
trust, including the administration and servicing of the assets which are not
serviced by the servicer, borrowings and other liabilities of the trust and the
conduct of the day to day operation of the trust.
The issuer trustee has no duty to supervise the trust manager in the
performance of its functions and duties, or the exercise of its discretions.
The trust manager has the absolute discretion to recommend Authorized
Investments to the issuer trustee and direct the issuer trustee in relation to
those Authorized Investments.
DELEGATION
The trust manager may, in carrying out and performing its duties and
obligations contained in the master trust deed, delegate to any of the trust
manager's officers, all acts, matters and things, whether or not requiring or
involving the trust manager's judgment or discretion, or appoint any person to
be its attorney, agent, delegate or sub contractor for such purposes and with
such powers as the trust manager thinks fit.
Notwithstanding that delegation, Interstar Securitisation Management Pty
Limited will continue to be liable for the acts and omissions of Interstar
Securities (Australia) Pty Limited in respect of the performance of the trust
manager's obligations under and in connection with the transaction documents,
any fixed-floating rate swap and the currency swap.
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Interstar Securities (Australia) Pty Limited will indemnify the trust
manager for any liability, cost or expense incurred by the trust manager as a
consequence of a failure by Interstar Securities (Australia) Pty Limited to
perform the obligations delegated to it by the trust manager.
TRUST MANAGER'S FEES, EXPENSES AND INDEMNIFICATION
The trust manager is entitled to a fee for each collection period equal to
0.055% per annum of the aggregate outstanding principal amount of the notes --
with respect to the Class A2 notes, the A$ Equivalent -- on the first day of
each collection period payable in arrears on the next monthly payment date.
The trust manager will be indemnified out of the assets of the trust for
any liability, cost or expense properly incurred by it in its capacity as trust
manager of the trust except to the extent that such liability, cost or expense
is caused by the fraud, negligence or wilful default of the trust manager.
REMOVAL OR RETIREMENT OF THE TRUST MANAGER
The trust manager shall retire as trust manager if the issuer trustee so
directs in writing following a Trust Manager's Default.
The trust manager may resign on giving to the issuer trustee, with a copy
to each rating agency, not less than 90 days, or another period as the trust
manager and the issuer trustee may agree, notice in writing of its intention to
do so.
On retirement or removal of the trust manager, the issuer trustee may
appoint another trust manager, or may act as trust manager, on such terms as
the issuer trustee sees fit, provided the appointment will not materially
prejudice the interests of noteholders. Until a replacement trust manager is
appointed, or the issuer trustee agrees to act as trust manager, the trust
manager must continue as trust manager. If a replacement trust manager is not
appointed within 90 days of the issuer trustee electing to appoint a new trust
manager, the issuer trustee will be the new trust manager.
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 swap.
THE NOTE TRUSTEE
The Bank of New York, New York branch will serve as the note trustee. The
corporate trust office of the note trustee responsible for the administration
of the trust is located at 101 Barclay Street, 21W, New York, New York 10286.
The note trustee will be entitled to execute any of its trusts or powers under
the note trust deed either directly or through agents or attorneys providing
that the use of such agent does not have an adverse effect on the rating of the
Class A2 notes. The note trustee and every other person properly appointed by
it under the note trust deed will be entitled to indemnification from the
assets of the trust against all loss, liability, expense, costs, damages,
actions, proceedings, claims and
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demands incurred by, or made against, the note trustee in connection with its
execution of the trusts under the note trust deed, provided that the
indemnification will not extend to any loss, liability or expense arising from
any fraud, negligence or wilful default by the note trustee or any other person
properly appointed by the note trustee.
The note trustee will at all times be a corporation or association,
organized and doing business under the laws of the United States of America,
any individual state or the District of Columbia, authorized under those laws
to exercise corporate trust powers, having a combined capital and surplus of at
least US$50,000,000, as set forth in its most recent published annual report of
condition, and subject to supervision or examination by federal, state or
District of Columbia authority. The note trustee may also, if permitted by the
SEC, be organized under the laws of a jurisdiction other than the United
States, provided that it is authorized under such laws to exercise corporate
trust powers and is subject to examination by authority of such jurisdictions
substantially equivalent to the supervision or examination applicable to a
trustee in the United States.
The note trustee may resign after giving three months' written notice to
the issuer trustee, the trust manager, the security trustee and each rating
agency. The issuer trustee may also remove the note trustee in the following
circumstances:
o if the note trustee becomes insolvent;
o if the note trustee ceases its business;
o if the note trustee fails to comply with any of its obligations under
any transaction document and the issuer trustee determines that this
failure has had, or if continued, will have, a Material Adverse Effect,
and if capable of remedy, the note trustee does not remedy this failure
within 14 days after the earlier of the following:
o the note trustee becoming aware of this failure; and
o receipt by the note trustee of written notice with respect to this
failure from either the issuer trustee or the trust manager; or
o if the note trustee fails to satisfy any obligation imposed on it under
the United States Trust Indenture Act of 1939 with respect to the trust
or the note trust deed.
Holders of 75% of the aggregate outstanding principal amount of the Class
A2 notes may require the issuer trustee to remove the note trustee.
Any resignation or removal of the note trustee and appointment of a
successor note trustee will not become effective until acceptance of the
appointment by a successor note trustee.
NOTE TRUSTEE'S ANNUAL REPORT
To the extent required by the United States Trust Indenture Act of 1939,
as amended, the note trustee will mail each year to all Class A2 noteholders a
report concerning:
o its eligibility and qualifications to continue as trustee under the note
trust deed;
o any amounts advanced by it under the note trust deed;
o the amount, interest rate and maturity date 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 Class A2 notes and
that has not previously been reported.
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LIST OF NOTEHOLDERS
Three or more holders of Class A2 notes, each of whom has owned a Class A2
note for at least six months, may, upon written request to the note trustee,
obtain access to the current list of Class A2 noteholders of the issuer trustee
for purposes of communicating with other Class A2 noteholders concerning their
rights under the note trust deed or the Class A2 notes. The note trustee may
elect not to give the requesting noteholders access to the list if it agrees to
mail the desired communication or proxy to all applicable noteholders.
REPORTS
On or before January 31 of each calendar year, the principal paying agent,
on behalf of the note trustee, will furnish to each person who at any time
during the prior calendar year was a Class A2 noteholder, a statement
containing the information required to be provided by an issuer of indebtedness
under the Code.
THE SECURITY TRUST DEED
GENERAL
Perpetual Trustee Company Limited of Level 7, 39 Hunter Street, Sydney,
New South Wales, Australia will be the security trustee. Perpetual Trustee
Company Limited's principal activities are the provision of services as
trustee, executors, administrators, attorneys and agents and other fiduciary
services. The issuer trustee will grant a first ranking floating charge,
registered with the Australian Securities and Investments Commission, over all
of the trust assets in favor of the security trustee. The floating charge will
secure the issuer trustee's obligations to the noteholders, the trust manager,
the security trustee, the servicer, the note trustee, the underwriters, each
paying agent, the calculation agent, the mortgage insurers, the underwriters,
the sellers with respect to the Accrued Interest Adjustment and seller's fees
and each provider of a support facility. These secured parties are collectively
known as the MORTGAGEES.
NATURE OF THE CHARGE
A company may not deal with its assets over which it has granted a fixed
charge without the consent of the relevant mortgagee. Fixed charges are usually
given over real property, marketable securities and other assets which will not
be dealt with by the company.
A floating charge, like that created by the security trust deed, does not
attach to specific assets but instead "floats" over a class of assets which may
change from time to time. The company granting the floating charge may deal
with those assets and give third parties title to those assets free from any
encumbrance, provided such dealings and transfers of title are in the ordinary
course of the company's business. The issuer trustee has agreed not to dispose
of or create interests in the assets of the trust subject to the floating
charge except in the ordinary course of its business and the trust manager has
agreed not to direct the issuer trustee to take any such actions. If the issuer
trustee disposes of any of the trust assets, including any housing loan, in the
ordinary course of its business, the person acquiring the property will take it
free of the floating charge. The floating charge granted over the trust assets
will crystallize, which means it becomes a fixed charge, upon the occurrence of
specific events set out in the security trust deed, including notice to the
issuer trustee following an event of default under the security trust deed. On
crystallization of the floating charge, the issuer trustee may not deal with
the assets of the trust without the consent of the security trustee.
THE SECURITY TRUSTEE
The security trustee is appointed to act as trustee on behalf of the
Mortgagees and holds the benefit of the charge over the trust assets in trust
for each Mortgagee on the terms and conditions of the security trust deed. If
there is a conflict between the duties owed by the security trustee to any
Mortgagees or class of Mortgagees, the security trustee must give priority to
the interests of the
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noteholders, as determined by the noteholders or the note trustee acting on
their behalf. In addition, the security trustee must give priority to the
interests of the Class A noteholders if, in the security trustee's opinion,
there is a conflict between the interests of the Class A noteholders and the
interests of the Class B noteholders or other Mortgagees.
DUTIES AND LIABILITIES OF THE SECURITY TRUSTEE
The security trust deed contains a range of provisions regulating the
scope of the security trustee's duties and liabilities. These include the
following:
o The security trustee is not required to monitor compliance by the issuer
trustee or trust manager with the transaction documents or their other
activities.
o Unless required by a transaction document, the security trustee need not
give Mortgagees information concerning the issuer trustee which comes
into the possession of the security trustee.
o The security trustee has no duties or responsibilities except those
expressly set out in the security trust deed or any collateral security.
o Any action taken by the security trustee under the security trust deed
or any collateral security binds all the Mortgagees.
o The security trustee in its capacity as a Mortgagee can exercise its
rights and powers as such as if it were not acting as the security
trustee. It and its associates may engage in any kind of business with
the issuer trustee, the trust manager, Mortgagees and others as if it
were not security trustee and may receive consideration for services in
connection with any transaction document or otherwise without having to
account to the Mortgagees.
EVENTS OF DEFAULT
Each of the following is an event of default under the security trust
deed:
o the issuer trustee fails to pay:
o any interest within 10 business days of the relevant payment date on
which the interest was due to be paid to noteholders; or
o any other amount owing to a Mortgagee within 10 business days of the
due date for payment, or within any applicable grace period agreed
with the relevant Mortgagee, or where the Mortgagee is a Class A2
noteholder, with the note trustee;
o the issuer trustee fails to perform or observe any other provisions,
other than the obligations already referred to in this section, of a
transaction document, any fixed-floating rate swap or the currency swap
and that default is not remedied within 30 days after written notice
from the security trustee requiring the failure to be remedied;
o an Insolvency Event occurs relating to the issuer trustee, in its
capacity as trustee of the trust;
o the charge created by the security trust deed is not or ceases to be a
first ranking charge over the assets of the trust, or any other
obligation of the issuer trustee, other than as mandatorily preferred by
law, ranks ahead of or equal with any of the moneys secured by the
security trust deed;
o any security interest over the trust assets is enforced;
o a fixed--floating rate swap or currency swap is terminated and a
replacement fixed--floating rate swap or currency swap on terms that
will not lead to a withdrawal or downgrade of the rating of any notes,
is not put in place;
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
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effect or a party becomes entitled to terminate, rescind or avoid all or
part of any transaction document, other than or a fixed--floating rate
swap or a currency swap; or
o without the prior consent of the security trustee, that consent being
subject in accordance with the terms of the security trust deed to the
prior written consent of the Noteholder Mortgagees:
o the trust is wound up, or the issuer trustee is required to wind up
the trust under the master trust deed or applicable law, or the
winding up of the trust commences;
o the trust is held or is conceded by the issuer trustee not to have
been constituted or to have been imperfectly constituted; or
o unless another trustee is appointed to the trust under the
transaction documents, the issuer trustee ceases to be authorized
under the trust to hold the property of the trust in its name and to
perform its obligations under the transaction documents, any
fixed-floating rate swap or the currency swap.
Where the security trustee has notified the rating agencies, obtained the
written consent of the relevant Noteholder Mortgagees and, in its reasonable
opinion, considers that it would not be materially prejudicial to the interests
of the Mortgagees, it may elect to treat an event that would otherwise be an
event of default as not being an event of default for the purpose of the
security trust deed. Unless the security trustee has made such an election and
provided the security trustee is actually aware of the occurrence of an event
of default, the security trustee must promptly convene a meeting of the Voting
Mortgagees at which it shall seek directions from the Voting Mortgagees by way
of Extraordinary Resolution of Voting Mortgagees regarding the action it should
take as a result of that event of default.
MEETINGS OF VOTING MORTGAGEES
The security trust deed contains provisions for convening meetings of the
Voting Mortgagees to enable the Voting Mortgagees to direct or consent to the
security trustee taking or not taking certain actions under the security trust
deed, including directing the security trustee to enforce the security trust
deed. VOTING MORTGAGEES are:
o the Noteholder Mortgagees alone for as long as amounts outstanding under
the notes are 75% or more of the total Secured Moneys; and
o otherwise, the note trustee, acting on behalf of the Class A2
noteholders and each other Mortgagee.
The security trustee must promptly convene a meeting of the Voting
Mortgagees after it receives notice, or has actual knowledge of, an event of
default under the security trust deed.
VOTING PROCEDURES
Every question submitted to a meeting of Voting Mortgagees shall be
decided in the first instance by a show of hands. If a show of hands results in
a tie, the chairman shall both on a show of hands and on a poll have a casting
vote in addition to the vote or votes, if any, to which he may be entitled as
Voting Mortgagee or as a representative. A representative is, in the case of
any noteholder, a person or body corporate appointed as a proxy for that
noteholder. On a show of hands, every person holding, or being a representative
holding or representing other persons who hold, Secured Moneys shall have one
vote except that the note trustee shall represent each Class A2 noteholder who
has directed the note trustee to vote on its behalf under the note trust deed.
On a poll, every person who is present shall have one vote for every US$10,000
or its equivalent, but not part thereof, of the Secured Moneys that he holds or
in respect of which he is a representative.
A resolution of all the Voting Mortgagees, including an Extraordinary
Resolution, may be passed, without any meeting or previous notice being
required, by an instrument or notes in writing which have been signed by all of
the Voting Mortgagees.
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ENFORCEMENT OF THE CHARGE
At any time after an event of default occurs, a resolution passed at a
duly convened meeting by a majority consisting of not less than 75% of the
votes capable of being cast by Voting Mortgagees present in person or by proxy
or a written resolution signed by all of the Voting Mortgagees may direct the
security trustee to do any or all of the following:
o declare the charge to be enforceable;
o declare all Secured Moneys immediately due and payable;
o convert the floating charge to a fixed charge over any or all of the
trust assets; or
o appoint a receiver over the trust assets or itself exercise the powers
that a receiver would otherwise have under the security trust deed.
If the Noteholder Mortgagees are the only Voting Mortgagees, they may
direct the security trustee to do any act which the security trustee is
required to do, or may only do, at the direction of an Extraordinary Resolution
of Voting Mortgagees, including enforcing the charge.
THE NOTE TRUSTEE AS VOTING MORTGAGEE
If an event of default under the security trust deed occurs and is
continuing, the issuer trustee and the trust manager will promptly notify the
note trustee of such an occurrence and the note trustee shall deliver to each
Class A2 noteholder notice of such event of default within 90 days of the date
that the note trustee became aware of such event of default. However in the
case of a default in payment of interest and principal on the notes, the note
trustee may withhold such notice if and so long as it determines in good faith
that withholding the notice is in the interests of Class A2 noteholders.
The rights, remedies and discretion of the Class A2 noteholders under the
security trust deed, including all rights to vote or give instructions or
consents to the security trustee and to enforce its undertakings and
warranties, may only be exercised by the note trustee on behalf of the Class A2
noteholders, and the security trustee may rely on any instructions or
directions given to it by the note trustee as being given on behalf of the
Class A2 noteholders without inquiry about compliance with the note trust deed.
The note trustee shall not be bound to vote under the security trust deed,
or otherwise direct the security trustee under the security trust deed or to
take any proceedings, actions or steps under, or any other proceedings pursuant
to or in connection with the security trust deed, the note trust deed or any
notes unless directed or requested to do so by the holders of at least 75% of
the aggregate outstanding principal amount of the Class A2 notes and then only
if the note trustee is indemnified to its satisfaction against all action,
proceedings, claims and demands to which it may render itself liable and all
costs, charges, damages and expenses which it may incur by so doing.
If any of the Class A2 notes remain outstanding and are due and payable
otherwise than by reason of a default in payment of any amount due on the Class
A2 notes, the note trustee must not vote under the security trust deed to, or
otherwise direct the security trustee to, dispose of the mortgaged property
unless either:
o a sufficient amount would be realized to discharge in full all amounts
owing to the Class A2 noteholders, and any other amounts payable by the
issuer trustee ranking in priority to or equal with the Class A2 notes;
or
o the note trustee is of the opinion, reached after considering at any
time and from time to time the advice of a merchant bank or other
financial adviser selected by the note trustee, that the cash flow
receivable by the issuer trustee or the security trustee under the
security trust deed will not, or that there is a significant risk that
it will not, be sufficient, having regard to any other relevant actual,
contingent or prospective liabilities of the issuer trustee, to
discharge in full in due course all the amounts referred to in the
preceding paragraph.
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LIMITATIONS OF ACTIONS BY THE SECURITY TRUSTEE
The security trustee is not obliged to take any action, give any consent
or waiver or make any determination under the security trust deed without being
directed to do so by the note trustee or by Extraordinary Resolution of the
Voting Mortgagees in accordance with the security trust deed. The security
trustee is not obligated to act unless it obtains an indemnity from the Voting
Mortgagees and funds have been deposited on behalf of the security trustee to
the extent to which it may become liable for the relevant enforcement actions.
If the security trustee convenes a meeting of the Voting Mortgagees, or is
required by an Extraordinary Resolution to take any action under the security
trust deed, and advises the Voting Mortgagees that it will not act in relation
to the enforcement of the security trust deed unless it is personally
indemnified by the Voting Mortgagees to its reasonable satisfaction against all
actions, proceedings, claims and demands to which it may render itself liable,
and all costs, charges, damages and expenses which it may incur in relation to
the enforcement of the security trust deed and is put in funds to the extent to
which it may become liable, including costs and expenses, and the Voting
Mortgagees refuse to grant the requested indemnity, and put the security
trustee in funds, then the security trustee is not obliged to act in relation
to that enforcement under the security trust deed. In those circumstances, the
Voting Mortgagees may exercise such of those powers conferred on them by the
security trust deed as they determine by Extraordinary Resolution.
The security trustee will not be liable for any decline in the value, nor
any loss realized upon any sale or other dispositions made under the security
trust deed, of any mortgaged property or any other property which is charged to
the security trustee by any other person in respect of or relating to the
obligations of the issuer trustee or any third party in respect of the issuer
trustee or the secured moneys or relating in any way to the mortgaged property
or for any such decline or loss directly or indirectly arising from its acting,
or failing to act, as a consequence of an opinion reached by it, except for the
fraud, negligence or wilful default of the security trustee.
PRIORITIES UNDER THE SECURITY TRUST DEED
The proceeds from the enforcement of the security trust deed are to be
applied in the order of priority set forth in this subsection, subject to any
other priority which may be required by statute or law. Certain federal taxes,
unpaid wages, long service leave, annual leave and similar employee benefits
and certain auditor's fees, if any, will be paid prior to the Mortgagees.
Subject to the foregoing, the proceeds from enforcement of the security trust
deed over the trust assets will be distributed as follows:
o first, to the extent required by law, to pay the holder of any prior
ranking security interest of which the security trustee has notice;
o second, to pay all costs, charges, expenses and disbursements properly
incurred in the exercise of any power by the security trustee, the note
trustee, a receiver or an attorney and other amounts payable to the
security trustee or note trustee under the security trust deed or the
note trust deed;
o third, to the extent that any moneys received by the security trustee
represent the proceeds of any cash collateral lodged by a support
facility provider, to pay that support facility provider;
o fourth, to pay pro rata:
o any fees and other expenses due to the security trustee, the note
trustee, a paying agent or the calculation agent;
o any fees and expenses incurred in relation to the operation and
administration of the trust, including the issuer trustee's fees and
expenses; and
o the receiver's remuneration;
o fifth, to pay pro rata the unpaid Accrued Interest Adjustment due to
each seller;
o sixth, to pay pro rata:
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o monetary liabilities of the issuer trustee to all providers of
support facilities;
o monetary liabilities of the issuer trustee to the Class A
noteholders; and
o monetary liabilities owing in relation to any redraws;
o seventh, to pay any monetary liabilities of the issuer trustee to Class
B noteholders;
o eighth, to pay pro rata any amounts not covered in this section owing to
any Mortgagee under any transaction document, any fixed-floating rate
swap or the 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 swap 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 swap except to the extent that they result from the fraud,
negligence or wilful default of the security trustee.
RETIREMENT AND REMOVAL OF THE SECURITY TRUSTEE
The security trustee may retire on three months' notice in writing to the
issuer trustee, the trust manager and each rating agency if a successor
security trustee is appointed.
Subject to the appointment of a successor security trustee and prior
notice being given to each rating agency, an Extraordinary Resolution of the
Voting Mortgagees may remove the security trustee at any time and the trust
manager may remove the security trustee if:
o an Insolvency Event occurs in relation to the security trustee in its
personal capacity;
o the security trustee ceases business;
o the security trustee fails to remedy within 14 days after written notice
from the trust manager any material breach of duty by it;
o there occurs a change in the control of the security trustee from that
existing on the date of the security trust deed, unless approved by the
trust manager.
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Upon notice of resignation or removal of the security trustee, the trust
manager has the right to appoint a successor security trustee who has been
previously approved by an Extraordinary Resolution of the Voting Mortgagees and
who accepts the appointment. If no successor security trustee is appointed
within 30 days after notice, the retiring security trustee may on behalf of the
Mortgagees appoint a successor security trustee, other than the trust manager
or its affiliates.
AMENDMENT
The issuer trustee and the security trustee may, following written notice
to each rating agency and with the written approval of the trust manager and
the note trustee, amend the security trust deed to, among other things, correct
a manifest error or ambiguity or which in the opinion of the security trustee
is necessary to comply with the provisions of any law or regulation. If the
amendment is prejudicial or likely to be prejudicial to the interests of the
Mortgagees or a class of Mortgagees, an Extraordinary Resolution of the Voting
Mortgagees or that class of Voting Mortgagees is required.
THE CHECK ACCOUNT AND DIRECT PAPERLESS ENTRY FACILITIES AGREEMENT
The servicer has arranged for National Australia Bank Limited to provide
borrowers with an option to utilise a check account and direct entry paperless
facility which provides borrowers with an expanded range of financial services
that are directly linked to the borrower's mortgage loan account. The provision
of these facilities has been documented in a check deposit and direct paperless
entry facilities agreement between National Australia Bank Limited, the
servicer and the issuer trustee known as the NBFI AGREEMENT.
The facilities under the NBFI Agreement are being provided to both:
o borrowers in relation to the trust; and
o borrowers under other Interstar mortgage backed securities programs
which are funded by various warehouse funding trusts, other Interstar
Millennium Trusts and other trusts which issue mortgage backed
securities. Perpetual Trustees Victoria Limited is the trustee of each
of these other trusts.
Under the terms of the NBFI Agreement, the servicer is responsible for the
day to day verification and processing of checks and direct entry paperless
facilities. In providing these facilities to borrowers, there is a possibility
that the servicer may:
o process and authorize the issuer trustee to pay forged or fraudulently
drawn checks or entries;
o fail to comply with stop payment notices made by borrowers; or
o breach other covenants, representations and warranties or other
provisions of the NBFI Agreement.
The NBFI Agreement also requires the issuer trustee to place moneys from
the trust into an account known as the TRUST DRAWINGS ACCOUNT which is
maintained with National Australia Bank Limited in the name of Perpetual
Trustees Victoria Limited -- Interstar Securities MBS Program Distribution
Account. The other trusts are also required to deposit moneys into this account
thereby resulting in co--mingling of part of the assets of the trust with
assets of other trusts.
National Australia Bank Limited may, in accordance with the terms of the
NBFI Agreement, be entitled to withdraw moneys out of that Trust Drawings
Account to the limit of moneys held in that account. National Australia Bank
Limited may withdraw those moneys even though the legal entitlement of National
Australia Bank Limited in that regard relates to a matter or thing concerning
one of the other trusts and not the trust. In those circumstances, the other
trust would be required to replenish the Trust Drawings Account. There is no
guarantee that the other trusts will have the financial capacity at the
relevant time to replenish the Trust Drawings Account in these circumstances.
THE INVESTMENT MANAGEMENT AGREEMENT
SERVICING OF HOUSING LOANS
The servicer is required to administer the housing loans in the following
manner:
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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 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 moneys due under the housing loans and related mortgages
and pay them into the collection account;
o if a default occurs in respect of a housing loan, to take action in
accordance with its normal enforcement procedures to enforce the
relevant housing loan and the related mortgage to the extent it
determines to be appropriate;
o to act in accordance with the terms of any mortgage insurance policies
or title insurance policies, not do or omit to do anything which could
be reasonably expected to prejudicially affect or limit its rights or
the rights of the issuer trustee under or in respect of a mortgage
insurance policy or title insurance policy;
o not consent to the creation or existence of any security interest in
favor of a third party in relation to any mortgaged property which would
rank before or equal with the related housing loan and mortgage or allow
the creation or existence of any other security interest in the
mortgaged property unless priority arrangements are entered into with
such third party under which the third party acknowledges that the
housing loan and the related mortgage ranks ahead in priority to the
third party's security interest on enforcement for 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 swap 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 swap and upon reasonable notice and at reasonable times permit
the issuer trustee to enter the premises and inspect the data and
records in relation to the trust and the housing loan agreements,
mortgages, certificates of title and other documents related to the
housing loans.
SERVICING COMPENSATION AND EXPENSES
The servicer will receive a fee for servicing the housing loans equal to
0.22% per annum of the aggregate outstanding principal amount of the notes --
with respect to the Class A2 notes, the A$ Equivalent -- on the first day of
each collection period payable in arrears on the next monthly payment date.
The servicer must pay from such fee all expenses incurred in connection
with servicing the housing loans, except for expenses relating to the
enforcement of a housing loan or its related mortgaged property or any amount
repaid to a liquidator or trustee in bankruptcy pursuant to any applicable law,
binding code, order or decision of any court, tribunal or the like or based on
advice of the servicer's legal advisers.
LIABILITY OF THE SERVICER
The servicer fully indemnifies the issuer trustee against all losses,
liabilities, costs and expenses incurred as a result of the failure by the
servicer to perform its duties under the investment management agreement or any
action or conduct undertaken or not taken by the servicer, including as a
consequence of a Servicer Transfer Event.
TERMINATION OF THE SERVICER
The issuer trustee must terminate the servicer's appointment if the issuer
trustee determines that any of the following SERVICER TRANSFER EVENT 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;
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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 AGREEMENTS
THE PRIMARY BACKUP SERVICER AGREEMENT
The issuer trustee, the primary backup servicer and the servicer have
entered into the primary backup servicer agreement. Under the primary backup
servicer agreement, the issuer trustee has agreed that in the event the
servicer is removed or retires as a servicer of certain trusts, including the
trust, it must promptly notify the primary backup servicer of such removal or
retirement and offer the appointment as servicer of the trust to the primary
backup servicer. Within 5 days of such notice, the primary backup servicer will
notify the issuer trustee whether it will accept such appointment.
If the primary backup servicer accepts the issuer trustee's appointment as
servicer, then the primary backup servicer will act as servicer of the trust
from the date of appointment until such time as the primary backup servicer is
removed or retires in accordance with the primary backup servicer agreement.
The issuer trustee cannot appoint the primary backup servicer as servicer
unless the rating agencies have confirmed in writing to the issuer trustee that
such appointment will not have an adverse effect on the credit ratings of the
notes.
Once the primary backup servicer has been appointed, it will be bound by
and must observe the rights, obligations and discretions conferred on the
servicer under the investment management
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agreement as if it were named in the investment management agreement as the
original servicer. Upon the appointment of the primary backup servicer as
servicer, Interstar Securities (Australia) Pty Limited will immediately provide
to the primary backup servicer all accounts, books, documents, records or other
property relating to the trust which are in its possession or control. The
issuer trustee will promptly arrange to provide the primary backup servicer
with such accounts or information relating to the trust which are in the
possession or control of the issuer trustee to enable the primary backup
servicer to fulfill its duties, obligations and discretions as servicer. The
issuer trustee may remove the primary backup servicer as servicer after
providing the primary backup servicer with written notice and in accordance
with the provisions of the investment management agreement.
Prior to its appointment as servicer, the primary backup servicer will be
entitled to receive a backup servicer standby fee from the servicer as agreed
from time to time between the servicer and the primary backup servicer and
notified to the issuer trustee. In the event that the servicer fails to pay the
primary backup servicer the backup servicer standby fee, then subject to the
primary backup servicer giving written notice to the issuer trustee, the issuer
trustee can deduct such amount from any amount payable to the servicer as a
servicer's fee. After its appointment as servicer, the primary backup servicer
will be entitled to receive the servicer's fee.
If the primary backup servicer is unable or declines the issuer trustee's
offer to be appointed as servicer, the issuer trustee will have the option to
appoint the secondary backup servicer as servicer under the secondary backup
servicer agreement.
The primary backup servicer agreement will be governed by the laws of the
State of Victoria.
THE SECONDARY BACKUP SERVICER AGREEMENT
The issuer trustee, the secondary backup servicer and the servicer have
entered into the secondary backup servicer agreement. The provisions of the
secondary backup servicer agreement are similar to the provisions described
above in the primary backup servicer agreement, except that the secondary
backup servicer is obliged to become servicer at the request of the issuer
trustee. The secondary backup servicer agreement will be governed by the laws
of the State of Victoria.
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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
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sent to Interstar Securities (Australia) Pty Limited's panel solicitor to
commence recovery action by issuing the relevant default notices pursuant to
the registered mortgage and statutory time allowed in that state or territory.
Recovery action continues until such time as the borrower pays the amount
noted in the default notices, plus interest, legal fees etc., or vacant
possession of the security property is obtained. If a borrower does not respond
to any of the notices issued or served upon him or her, vacant possession may
be obtained within 45 days of issuing the letter of demand.
For housing loans:
o with an original loan balance in excess of A$300,000; or
o which, based on the characteristics of the borrower, the loan-to-value
ratio and payment history, the servicer determines to have a particular
risk profile,
the servicer will issue a letter of demand when the loan is 30 days delinquent.
These time frames assume that the borrower has taken no action to remedy
the default.
Upon gaining possession of the security property, two marketing appraisals
and an updated valuation are requested, with one of the marketing appraisals
selected to market and sell the property via auction or private treaty. A
reserve price/list price is determined with reference to the marketing
appraisals and valuation. Once a figure has been reached, this is submitted to
the mortgage insurer for approval. After the security property is sold and
funds received and an outstanding loan balance remains, a claim for the
shortfall is submitted to the mortgage insurer for processing.
It should also be noted that the mortgagee's ability to exercise its power
of sale on the mortgaged property is dependent upon the statutory restrictions
of the relevant State or Territory as to notice requirements. In addition,
there may be factors outside the control of the mortgagee such as whether the
mortgagor contests the sale and the market conditions at the time of sale.
These issues may affect the length of time between the decision of the
mortgagee to exercise its power of sale and final completion of the sale.
The arrears and security enforcement procedures may change over time as a
result of business changes, or legislative and regulatory changes.
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SERVICER DELINQUENCY EXPERIENCE
The table below summarizes the delinquency and foreclosure experience of
housing loans serviced by Interstar Securities (Australia) Pty Limited.
INTERSTAR MORTGAGE BACKED PROGRAM -- TOTAL PORTFOLIO HISTORICAL DELINQUENCIES
SEPTEMBER 30 MARCH 31 SEPTEMBER 30
PORTFOLIO AT: 1997 1998 1998
- ---------------------------- -------------------- ---------------------- ----------------------
Outstanding Balance ........ $ 885,824,173.73 $ 1,096,782,340.81 $ 1,258,820,846.88
Number of Loans
Outstanding ............... 6,714 8,112 9,440
Percentage of Delinquent
Loans *
31 - 60 Days ............... 0.37% 0.38% 0.40%
61 - 90 Days ............... 0.13% 0.20% 0.23%
91 Days Plus ............... 0.09% 0.12% 0.17%
Total Delinquencies over
30 Days ................... 0.60% 0.70% 0.80%
MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30
PORTFOLIO AT: 1999 1999 2000 2000
- ---------------------------- ---------------------- ---------------------- ---------------------- ----------------------
Outstanding Balance ........ $ 1,500,609,532.07 $ 1,968,607,661.73 $ 2,609,611,105.11 $ 3,344,250,484.60
Number of Loans
Outstanding ............... 11,328 14,498 18,579 23,091
Percentage of Delinquent
Loans *
31 - 60 Days ............... 0.55% 0.54% 0.43% 0.35%
61 - 90 Days ............... 0.38% 0.31% 0.24% 0.16%
91 Days Plus ............... 0.18% 0.15% 0.13% 0.10%
Total Delinquencies over
30 Days ................... 1.11% 1.00% 0.80% 0.61%
MARCH 31 SEPTEMBER 30 MARCH 31
PORTFOLIO AT: 2001 2001 2002
- ---------------------------- ---------------------- ---------------------- ----------------------
Outstanding Balance ........ $ 4,021,142,286.04 $ 4,820,490,560.20 $ 5,864,319,193.21
Number of Loans
Outstanding ............... 27,406 32,114 38,133
Percentage of Delinquent
Loans *
31 - 60 Days ............... 0.33% 0.28% 0.40%
61 - 90 Days ............... 0.14% 0.12% 0.19%
91 Days Plus ............... 0.06% 0.06% 0.10%
Total Delinquencies over
30 Days ................... 0.53% 0.46% 0.70%
SEPTEMBER 30 MARCH 31 SEPTEMBER 30 MARCH 31
SIX MONTH PERIOD ENDING 1997 1998 1998 1999
- ----------------------------- -------------- ---------- -------------- ----------
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 1999 2000 2000 2001 2001 2002
- ----------------------------- -------------- ---------- -------------- ---------- -------------- ---------
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.
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PREPAYMENT AND YIELD CONSIDERATIONS
The following information is given solely to illustrate the effect of
prepayments of the housing loans on the weighted average life of the Class A2
notes under the stated assumptions and is not a prediction of the prepayment
rate that might actually be experienced.
GENERAL
The rate of principal payments and aggregate amount of distributions on
the notes and the yield to maturity of the notes will relate to the rate and
timing of payments of principal and the amount and timing of redraws on the
housing loans. The rate of principal payments on the housing loans will in turn
be affected by the amortization schedules of the housing loans and by the rate
of principal prepayments, including for this purpose prepayments resulting from
refinancing, liquidations of the housing loans due to defaults, casualties,
condemnations and repurchases by a seller. Subject, in the case of fixed rate
housing loans, to the payment of applicable fees, the housing loans may be
prepaid by the mortgagors at any time.
PREPAYMENTS
Prepayments, liquidations and purchases of the housing loans, including
optional purchase of the remaining housing loans in connection with the
termination of the trust, will result in early distributions of principal
amounts on the notes. Prepayments of principal may occur in the following
situations:
o refinancing by borrowers with other financiers;
o receipt by the issuer trustee of enforcement proceeds due to a borrower
having defaulted on its housing loan;
o receipt by the issuer trustee of insurance proceeds in relation to a
claim under a mortgage insurance policy in respect of a housing loan;
o repurchase of the housing loans by a seller as a result of a breach by
it of certain representations;
o repurchase of the housing loans as a result of an optional termination
or a redemption for taxation or other reasons;
o receipt of proceeds of enforcement of the security trust deed prior to
the final maturity date of the notes; or
o receipt of proceeds of the sale of housing loans if the trust is
terminated while notes are outstanding, for example, if required by law,
and the housing loans are then either:
o repurchased by a seller under its right of first refusal; or
o sold to a third party.
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.
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WEIGHTED AVERAGE LIVES
The weighted average life of a note refers to the average amount of time
that will elapse from the date of issuance of the note to the date each U.S.
dollar in respect of principal repayable under the note is reduced to zero.
Prepayments of principal of the mortgage loans will tend to shorten the
weighted average life of the Class A2 notes, while redraws will tend to extend
the weighted average life of the Class A2 notes.
Usually, greater than anticipated principal prepayments will increase the
yield on notes purchased at a discount and will decrease the yield on notes
purchased at a premium. The effect on your yield due to principal prepayments
occurring at a rate that is faster or slower than the rate you anticipated will
not be entirely offset by a subsequent similar reduction or increase,
respectively, in the rate of principal payments. The amount and timing of
delinquencies and defaults on the housing loans and the recoveries, if any, on
defaulted housing loans and foreclosed properties will also affect the weighted
average life of the notes.
The following table is based on a constant prepayment rate model. Constant
prepayment rate represents an assumed constant rate of prepayment each month,
expressed as a per annum percentage of the principal balance of the pool of
mortgage loans for that month. Constant prepayment rate does not purport to be
a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of housing loans, including the
housing loans in your pool. None of the sellers nor the trust manager believes
that any existing statistics of which it is aware provide a reliable basis for
noteholders to predict the amount or timing of receipt of housing loan
prepayments.
The following table is based upon the assumptions in the following
paragraph, and not upon the actual characteristics of the housing loans. Any
discrepancies between characteristics of the actual housing loans and the
assumed housing loans may have an effect upon the percentages of the principal
balances outstanding and weighted average lives of the notes set forth in the
table. Furthermore, since these discrepancies exist, principal payments on the
notes may be made earlier or later than the table indicates.
The following table was 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 June 28, 2002;
o closing date for the notes is July 9, 2002;
o on the closing date the issuer trustee will purchase housing loans with
an aggregate principal balance of A$1,569,460,814;
o housing loans will be purchased by the issuer trustee during the
pre-funding period with an aggregate amount of A$285,743,315 and will be
purchased in full on August 7, 2002;
o the characteristics of the housing loans purchased during the
pre-funding period will have the same blended loan characteristics as
the housing loan pool described in "Description of the Assets of the
Trust", save for its total size;
o payments on the Class A2 notes are made on each quarterly payment date,
regardless of the day on which payment actually occurs, commencing in
October 2002, and are made in accordance with the priorities described
in this prospectus;
o the housing loans' prepayment rates are equal to the respective
percentages of constant prepayment rate indicated in the tables;
o the scheduled payments of principal and interest on the housing loans
will be paid monthly and will be timely delivered on the fifteenth day
of each month, with no defaults or arrears;
o there are no redraws, principal increases, substitutions or payment
holidays with respect to the housing loans and, accordingly, no Class A1
notes will be issued;
97
o housing loans bearing a variable rate of interest maintain the rate set
as at May 31, 2002;
o housing loans bearing a fixed rate of interest will continue to bear the
rate set at May 31, 2002, even at the expiration of their fixed rate
periods;
o borrowers in relation to any interest only housing loans in the
portfolio are assumed to pay no principal for a period of five years and
will pay principal and interest thereafter;
o Liquid Authorized Investments are maintained at the Prescribed Minimum
Level throughout the life of the notes and the Prescribed Minimum Level
at any time is 1% of the A$ Equivalent of the outstanding principal
amount of all notes at that time;
o all prepayments are received on the fifteenth day of each month and
include the full month's interest on the prepayment;
o principal collections are distributed according to the rules of
distribution set forth in this prospectus;
o all payments under the swaps are made as scheduled;
o the trust manager does not direct the issuer trustee to exercise its
right of optional redemption of the notes, except, with respect to the
line titled "Weighted Average Life -- To Earlier of Clean Up Call and
Step-Up and Call (Years)", in respect of which the trust manager
exercises its right to redeem the notes on the earlier to occur of the
Step-Up Margin Date and the quarterly payment date on which the total
outstanding principal amount of all notes in all classes does not exceed
10% of the initial principal amount of all notes;
o the exchange rate is US$0.5738=A$1.00.
It is not likely that the housing loans will pay at any assumed constant
prepayment rate to maturity or that all housing loans will prepay at the same
rate. In addition, the diverse remaining terms to maturity of the housing loans
could produce slower or faster distributions of principal than indicated in the
tables at the assumed constant prepayment rate specified, even if the weighted
average remaining term to maturity of the housing loans is the same as the
weighted average remaining term to maturity of the assumptions described in
this section. You are urged to make your investment decisions on a basis that
includes your determination as to anticipated prepayment rates under a variety
of the assumptions discussed in this prospectus as well as other relevant
assumptions.
In the following tables, the percentages have been rounded to the nearest
whole number and the weighted average life of a class of notes is determined by
the following three step process:
o multiplying the amount of each payment of principal thereof by the
number of years from the date of issuance to the related payment date,
o summing the results, and
o dividing the sum by the aggregate distributions of principal referred to
in the first clause above and rounding to two decimal places.
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PERCENTAGE OF INITIAL PRINCIPAL OUTSTANDING AT THE FOLLOWING PERCENTAGES
OF CONSTANT PREPAYMENT RATE*
DATE 0.0% 10.0% 15.0% 17.5% 20.0% 25.0% 30.0%
- ----------------------------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Closing Date ...................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
July 7, 2003 ...................... 99.1% 88.6% 83.3% 80.7% 78.1% 72.8% 67.6%
July 7, 2004 ...................... 98.0% 78.1% 69.0% 64.6% 60.3% 52.2% 44.5%
July 7, 2005 ...................... 97.0% 68.8% 56.8% 51.3% 46.2% 36.8% 28.5%
July 7, 2006 ...................... 95.8% 60.4% 46.6% 40.5% 35.0% 25.3% 17.4%
July 7, 2007 ...................... 94.5% 52.9% 37.9% 31.6% 26.1% 16.8% 9.7%
July 7, 2008 ...................... 92.4% 45.7% 30.3% 24.1% 18.8% 10.4% 4.3%
July 7, 2009 ...................... 90.2% 39.3% 23.9% 18.0% 13.0% 5.6% 0.6%
July 7, 2010 ...................... 87.8% 33.6% 18.5% 13.0% 8.5% 2.1% 0.0%
July 7, 2011 ...................... 85.2% 28.5% 14.0% 9.0% 5.0% 0.0% 0.0%
July 7, 2012 ...................... 82.5% 23.9% 10.3% 5.7% 2.2% 0.0% 0.0%
July 7, 2013 ...................... 79.6% 19.9% 7.1% 3.0% 0.0% 0.0% 0.0%
July 7, 2014 ...................... 76.6% 16.3% 4.5% 0.9% 0.0% 0.0% 0.0%
July 7, 2015 ...................... 73.3% 13.1% 2.3% 0.0% 0.0% 0.0% 0.0%
July 7, 2016 ...................... 69.8% 10.2% 0.4% 0.0% 0.0% 0.0% 0.0%
July 7, 2017 ...................... 66.2% 7.7% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2018 ...................... 62.2% 5.4% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2019 ...................... 58.1% 3.4% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2020 ...................... 53.6% 1.7% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2021 ...................... 48.9% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2022 ...................... 43.9% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2023 ...................... 38.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2024 ...................... 33.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2025 ...................... 28.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2026 ...................... 22.9% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2027 ...................... 17.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2028 ...................... 10.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2029 ...................... 4.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
July 7, 2030 ...................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Weighted Average Life --
To Earlier of Clean Up Call and
Step-Up and Call (Years) .......... 6.73 4.71 3.94 3.61 3.30 2.77 2.32
To Maturity (Years) ............... 17.73 6.59 4.66 4.03 3.54 2.82 2.32
- ----------
* Totals may not sum exactly due to rounding.
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USE OF PROCEEDS
The proceeds from the sale of the Class A2 notes, after being exchanged
pursuant to the currency swap, will amount to A$1,792,114,695 and will be used
by the issuer trustee, in most part, to acquire from each seller that seller's
beneficial interest in the housing loans and related mortgages, to make a
deposit in the prefunding account and to acquire Liquid Authorized Investments.
See "Description of the Assets of the Trust -- Acquisition of Housing Loans
after the Closing Date" and "Description of the Class A2 Notes -- Application
of Capital and Liquid Authorized Investments to Available Income".
LEGAL ASPECTS OF THE HOUSING LOANS
he 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
100
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 securities over real property is made
complex by the fact that each State and Territory of Australia has separate
governing legislation. The following is a brief overview of some issues
involved in taking security over land.
Under Torrens title, registration of a mortgage using the prescribed form
executed by the mortgagor is required in order for the mortgagee to obtain both
the remedies of a mortgagee granted by statute and the relevant priorities
against other secured creditors. To this extent, the mortgagee is said to have
a legal or registered title. However, registration does not transfer title in
the property and the mortgagor remains as legal owner. Rather, the Torrens
title mortgage takes effect as a statutory charge or security only. The Torrens
title mortgagee does not obtain an "estate" in the property but does have an
interest in the land which is recorded on the register and the certificate of
title for the property. A search of the register by any subsequent creditor or
proposed creditor will reveal the existence of the prior mortgage.
In most States and Territories of Australia, a mortgagee will retain a
duplicate certificate of title which mirrors the original certificate of title
held at the relevant land registry office. Although the certificate is not a
document of title as such, the procedure for replacement is sufficiently
onerous to act
101
as a deterrent against most mortgagor fraud. Failure to retain the certificate
may in certain circumstances constitute negligent conduct resulting in a
postponement of the mortgagee's priority to a later secured creditor.
In Queensland, under the Land Title Act 1994, duplicate certificates of
title are no longer issued to mortgagees as a matter of practice. A record of
the title is stored on computer at the land registry office and the mortgage is
registered on that computerized title.
Once the mortgagor has repaid the loan, a discharge of mortgage executed
by the mortgagee is lodged with the relevant land registry office by the
mortgagor or the mortgagee and the mortgage will then be removed from the
certificate of title for the property.
ENFORCEMENT OF REGISTERED MORTGAGES
Subject to the discussion in this section, if a borrower defaults under a
housing loan the loan documents provide that all moneys under the housing loan
may be declared immediately due and payable. In Australia, a lender may sue to
recover all outstanding principal, interest and fees under the personal
covenant of a borrower contained in the loan documents to repay those amounts.
In addition, the lender may enforce a registered mortgage in relation to the
defaulted loan. Enforcement may occur in a number of ways, including the
following:
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
102
will be determined by reference to such factors as the prevailing market
interest rates. The Consumer Credit Legislation does not impose a limit on the
rate of default interest, but a rate which is too high may entitle the borrower
to have the loan agreement re-opened on the ground that it is unjust. Under the
Corporations Act 2001 of Australia, the liquidator of a company may avoid a
loan under which an extortionate interest rate is levied.
The Consumer Credit Legislation requires that any fee or charge to be
levied by the lender must be provided for in the contract, otherwise it cannot
be levied. The regulations under the Consumer Credit Legislation may also from
time to time prohibit certain fees and charges. The Consumer Credit Legislation
also requires that establishment fees, termination fees and prepayment fees
must be reasonable otherwise they may be reduced or set aside.
BANKRUPTCY
The insolvency of a natural person is governed by the provisions of the
Bankruptcy Act 1966 of Australia, which is a federal statute. Generally,
secured creditors of a natural person, 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.
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The security interests may have priority over pre-existing mortgages. To the
extent that the issuer trustee or a receiver appointed on its behalf incurs any
such liabilities, it will be entitled to be indemnified out of the assets of
the trust.
INSOLVENCY CONSIDERATIONS
The current transaction is designed to mitigate insolvency risk. For
example, the assignment of the beneficial interest of each seller in the
housing loans to the issuer trustee should ensure that the housing loans are
not assets available to the liquidator or creditors of each seller in the event
of an insolvency of that seller. Similarly, the assets in the trust should not
be available to other creditors of the issuer trustee in its personal capacity
or as trustee of any other trust in the event of an insolvency of the issuer
trustee.
If any Insolvency Event occurs with respect to the issuer trustee in its
capacity as trustee of the trust, the security trust deed may be enforced by
the security trustee at the direction of the Voting Mortgagees. See
"Description of the Transaction Documents -- The Security Trust Deed --
Enforcement of the Charge". The security created by the security trust deed
will stand outside any liquidation of the issuer trustee, and the assets the
subject of that security will not be available to the liquidator or any
creditor of the issuer trustee, other than a creditor which has the benefit of
the security trust deed until the secured obligations have been satisfied. The
proceeds of enforcement of the security trust deed are to be applied by the
security trustee as set out in "Description of the Transaction Documents -- The
Security Trust Deed -- Priorities Under the Security Trust Deed". If the
proceeds from enforcement of the security trust deed are not sufficient to
redeem the Class A2 notes in full, some or all of the Class A2 noteholders will
incur a loss.
TAX TREATMENT OF INTEREST ON AUSTRALIAN HOUSING LOANS
Under Australian law, interest on loans used to purchase a person's
primary place of residence is not ordinarily deductible for taxation purposes.
Conversely, interest payments on loans and other non-capital expenditures
relating to non-owner occupied properties that generate taxable income are
generally allowable as tax deductions.
CONSUMER CREDIT LEGISLATION
The majority of the housing loans are regulated by the Consumer Credit
Legislation. Under the Consumer Credit Legislation a borrower has the right to
apply to a court to do the following, among other things:
o vary the terms of a housing loan on the grounds of hardship or that it
is an unjust contract;
o reduce or cancel any interest rate payable on a housing loan if the
interest rate is changed in a way which is unconscionable;
o have certain provisions of a housing loan which are in breach of the
legislation declared unenforceable;
o obtain an order for a civil penalty; or
o obtain additional restitution or compensation in relation to breaches of
the Consumer Credit Legislation in relation to a housing loan or a
mortgage.
Any order under the Consumer Credit Legislation may affect the timing or
amount of interest or principal payments or repayments under the relevant
housing loan, which might in turn affect the timing or amount of interest or
principal payments or repayments to you under the notes.
At the time the issuer trustee acquires the beneficial interest in the
housing loans, the trust manager and the servicer represent and warrant that
the housing loans and related mortgages complied in all material respects with
the Consumer Credit Legislation at the applicable cut-off date. Under the
investment management agreement, the servicer has undertaken to comply with the
Consumer Credit Legislation in connection with servicing the housing loans and
related mortgages.
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UNITED STATES FEDERAL INCOME TAX MATTERS
OVERVIEW
The following is a summary of the material United States federal income
tax consequences of the purchase, ownership and disposition of the Class A2
notes by investors who are subject to United States federal income tax. This
summary is based upon current provisions of the Internal Revenue Code of 1986,
as amended, proposed, temporary and final Treasury regulations under the Code,
and published rulings and court decisions, all of which are subject to change,
possibly retroactively, or to a different interpretation at a later date by a
court or by the Internal Revenue Service. The parts of this summary which
relate to matters of law or legal conclusions represent the opinion of Mayer,
Brown, Rowe & Maw, special United States federal tax counsel for the trust
manager, and are as qualified in this summary. We have not sought and will not
seek any rulings from the Internal Revenue Service about any of the United
States federal income tax consequences we discuss, and we cannot assure you
that the Internal Revenue Service will not take contrary positions.
Mayer, Brown, Rowe & Maw has prepared or reviewed the statements under the
heading "United States Federal Income Tax Matters" and is of the opinion that
these statements discuss the material United States federal income tax
consequences to investors generally of the purchase, ownership and disposition
of the Class A2 notes. However, the following discussion does not discuss and
Mayer, Brown, Rowe & Maw is unable to opine as to the unique tax consequences
of the purchase, ownership and disposition of the Class A2 notes by investors
that are given special treatment under the United States federal income tax
laws, including:
o banks and thrifts;
o insurance companies;
o regulated investment companies;
o dealers in securities;
o investors that will hold the notes as a position in a "straddle" for tax
purposes or as a part of a "synthetic security", "conversion
transaction" or other integrated investment comprised of the notes and
one or more other investments;
o foreign investors, except as specifically set forth below;
o trusts and estates; and
o pass-through entities, the equity holders of which are any of the
foregoing.
Additionally, the discussion regarding the Class A2 notes is limited to
the United States federal income tax consequences to the initial investors and
not to a purchaser in the secondary market and is limited to investors who will
hold the Class A2 notes as "capital assets" within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the CODE).
It is suggested that prospective investors consult their own tax advisors
about the United States federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the Class A2
notes, including the advisability of making any election discussed under
"Market Discount".
The issuer trustee will be reimbursed for any United States federal income
taxes imposed on it in its capacity as trustee of the trust out of the assets
of the trust. Also, based on the representation of the trust manager that the
trust does not and will not have an office in the United States, the trust does
not and will not avail itself of the office of an agent in the United States,
and that the trust is not conducting, and will not conduct, either directly or
through an agent, any activities in the United States, other than in connection
with its issuance of the Class A2 notes, in the opinion of Mayer, Brown, Rowe &
Maw, the issuer trustee and the trust will not be subject to United States
federal income tax.
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In the opinion of Mayer, Brown, Rowe & Maw, special tax counsel for the
trust manager, the Class A2 notes will be characterized as debt for United
States federal income tax purposes. Each Class A2 noteholder, by acceptance of
a Class A2 note, agrees to treat the notes as indebtedness.
GENERAL
Mayer, Brown, Rowe & Maw is of the opinion that you will be required to
report interest income on the Class A2 notes you hold in accordance with your
method of accounting.
SALE OF NOTES
Mayer, Brown, Rowe & Maw is of the opinion that if you sell a Class A2
note, you will recognize gain or loss equal to the difference between the
amount realized on the sale, other than amounts attributable to, and taxable
as, accrued interest, and your adjusted tax basis in the Class A2 note. Your
adjusted tax basis in a note will equal your cost for the Class A2 note,
decreased by any amortized premium and any payments other than interest made on
the Class A2 note and increased by any market discount or original issue
discount previously included in your income. Any gain or loss will generally be
a capital gain or loss, other than amounts representing accrued interest or
market discount, and will be long-term capital gain or loss if the Class A2
note was held as a capital asset for more than one year. In the case of an
individual taxpayer, the maximum long-term capital gains tax rate is lower than
the maximum ordinary income tax rate. Any capital losses realized may be
deducted by a corporate taxpayer only to the extent of capital gains and by an
individual taxpayer only to the extent of capital gains plus US$3,000 of other
United States income.
MARKET DISCOUNT
In the opinion of Mayer, Brown, Rowe & Maw, you will be considered to have
acquired a Class A2 note at a "market discount" to the extent the remaining
principal amount of the note exceeds your tax basis in the note, unless the
excess does not exceed a prescribed de minimis amount. If the excess exceeds
the de minimis amount, you will be subject to the market discount rules of
Sections 1276 and 1278 of the Code with regard to the note.
In the case of a sale or other disposition of a Class A2 note subject to
the market discount rules, Section 1276 of the Code requires that gain, if any,
from the sale or disposition be treated as ordinary income to the extent the
gain represents market discount accrued during the period the note was held by
you, reduced by the amount of accrued market discount previously included in
income.
In the case of a partial principal payment of a Class A2 note subject to
the market discount rules, Section 1276 of the Code requires that the payment
be included in ordinary income to the extent the payment does not exceed the
market discount accrued during the period the note was held by you, reduced by
the amount of accrued market discount previously included in income.
Generally, market discount accrues under a straight line method, or, at
the election of the taxpayer, under a constant interest rate method. However,
in the case of bonds with principal payable in two or more installments, such
as the Class A2 notes, the manner in which market discount is to be accrued
will be described in Treasury regulations not yet issued. Until these Treasury
regulations are issued, you should follow the explanatory Conference Committee
Report to the Tax Reform Act of 1986 for your accrual of market discount. This
Conference Committee Report indicates that holders of these obligations may
elect to accrue market discount either on the basis of a constant interest rate
or as follows:
o for those obligations that have original issue discount, market discount
shall be deemed to accrue in proportion to the accrual of original issue
discount for any accrual period; and
o for those obligations which do not have original issue discount, the
amount of market discount that is deemed to accrue is the amount of
market discount that bears the same ratio to the total amount of
remaining market discount that the amount of stated interest paid in the
accrual period bears to the total amount of stated interest remaining to
be paid on the obligation at the beginning of the accrual period.
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Under Section 1277 of the Code, if you incur or continue debt that is used
to purchase a Class A2 note subject to the market discount rules, and the
interest paid or accrued on this debt in any taxable year exceeds the interest
and original issue discount currently includible in income on the note,
deduction of this excess interest must be deferred to the extent of the market
discount allocable to the taxable year. The deferred portion of any interest
expense will generally be deductible when the market discount is included in
income upon the sale, repayment, or other disposition of the indebtedness.
Section 1278 of the Code allows a taxpayer to make an election to include
market discount in gross income currently. If an election is made, the
previously described rules of Sections 1276 and 1277 of the Code will not apply
to the taxpayer.
Due to the complexity of the market discount rules, we suggest that you
consult your tax advisors as to the applicability and operation of these rules.
PREMIUM
In the opinion of Mayer, Brown, Rowe & Maw, you will generally be
considered to have acquired a Class A2 note at a premium if your tax basis in
the note exceeds the remaining principal amount of the note. In that event, if
you hold a Class A2 note as a capital asset, you may amortize the premium as an
offset to interest income under Section 171 of the Code, with corresponding
reductions in your tax basis in the note if you have made an election under
Section 171 of the Code. Generally, any amortization is on a constant yield
basis. However, in the case of bonds with principal payable in two or more
installments, like the Class A2 notes, the previously discussed conference
report, which indicates a Congressional intent that amortization be in
accordance with the rules that will apply to the accrual of market discount on
these obligations, should be followed for the amortization of such premium. We
suggest that you consult your tax advisor as to the applicability and operation
of the rules regarding amortization of premium.
BACKUP WITHHOLDING
Mayer, Brown, Rowe & Maw is of the opinion that, backup withholding taxes
will be imposed on payments to you of interest paid, and original issue
discount accrued, if any, on the Class A2 notes if, upon issuance, you fail to
supply the trust manager or its broker with a certified statement, under
penalties of perjury, containing your name, address, correct taxpayer
identification number, and a statement that you are not required to pay backup
withholding. The backup withholding tax rate of 30%, in effect for payments
made during the years 2002 and 2003, will be reduced to 29% for payments made
during the years 2004 and 2005, and 28% for payments made during the years 2006
through 2010. For payments made after 2010, the backup withholding tax rate
will be increased to 31%. Exempt investors, such as corporations, tax-exempt
organizations, qualified pension and profit sharing trusts, individual
retirement accounts or non-resident aliens who provide certification of their
status as non-resident are not subject to backup withholding. Information
returns will be sent annually to the Internal Revenue Service by the trust
manager and to you stating the amount of interest paid, original issue discount
accrued, if any, and the amount of tax withheld from payments on the Class A2
notes. We suggest that you consult your tax advisors about your eligibility
for, and the procedure for obtaining, exemption from backup withholding.
A foreign investor generally will be exempt from backup withholding and
information reporting requirements, assuming payments on the Class A2 notes are
otherwise exempt from United States federal income tax, provided that such
foreign investor complies with certain certification and identification
procedures in order to prove its exemption. In order for a foreign investor to
prove its exemption, such foreign investor should submit the appropriate
Internal Revenue Service Form W-8, attesting to such foreign investor's foreign
status. We suggest that you consult your tax advisors about your eligibility
for, and the procedure for obtaining, such an exemption.
The Treasury Department has issued new regulations that, among other
things, make certain modifications to the backup withholding rules. The new
regulations attempt to unify certification requirements and modify reliance
standards. The new regulations are effective for payments made after 31
December 2000, subject to certain transition rules. We suggest that you consult
your own tax advisor regarding the impact of the new regulations.
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AUSTRALIAN TAX MATTERS
The following statements with respect to Australian taxation are the
material tax consequences for holders who are not residents of Australia for
tax purposes of purchasing, holding and disposing of the Class A2 notes and are
based on advice received by the trust manager on the basis of Australian law as
in effect on the date of this prospectus which is subject to change possibly
with retroactive effect. It is suggested that purchasers of Class A2 notes
should consult their own tax advisers concerning the consequences, in their
particular circumstances under Australian tax laws and the laws of any other
taxing jurisdiction, of the purchase, ownership, disposal or dealing of or in
the notes.
PAYMENTS OF PRINCIPAL, PREMIUMS AND INTEREST
Under existing Australian tax law, non-resident holders of notes or
interests in any global note, other than persons holding such securities or
interest as part of a business carried on, at or through a permanent
establishment in Australia, are not subject to Australian income tax on
payments of interest or amounts in the nature of interest, other than interest
withholding tax, which is currently 10%, on interest or amounts in the nature
of interest paid on the notes. A premium on redemption would generally be
treated as an amount in the nature of interest for this purpose.
Pursuant to section 128F of the Income Tax Assessment Act 1936 of the
Commonwealth of Australia (the TAX ACT), an exemption from Australian interest
withholding tax applies provided all prescribed conditions are met.
These conditions are:
o the issuer trustee is a company that is a resident of Australia when it
issues the notes and when interest, as defined in section 128A (1AB) of
the Tax Act, is paid; and
o the notes, or a global bond or note or interests in such a global bond
or note, were issued in a manner which satisfied the public offer test
as prescribed under section 128F of the Tax Act.
The issuer trustee will seek to list the Class A2 notes on the Luxembourg
Stock Exchange and the Australian Stock Exchange. On the basis that the issuer
trustee has previously entered into an agreement with the underwriters in
relation to the placement of the Class A2 notes, requiring the issuer trustee
to seek any such listing, the issue of the Class A2 notes will satisfy the
public offer test of section 128F of the Tax Act.
The public offer test will not be satisfied, if at the time of issue, the
issuer trustee knew or had reasonable grounds to suspect that the Class A2
notes were being or would later be acquired directly or indirectly by an
associate of the issuer trustee within the meaning of that section, other than
in the capacity of a dealer, trust manager or underwriter in relation to the
placement of a note. "Associate" for these purposes is widely defined and
means, generally speaking, in relation to an issuer acting in the capacity of a
trustee, the beneficiaries of the trust. Thus the relevant associates of the
issuer trustee in the present case will be the servicer as the residual
beneficiary of the trust and the associates of the servicer and the other
beneficiaries of the trust, if any, from time to time.
If the requirements for exemption under section 128F of the Tax Act are
met with respect to the Class A2 notes, payments of principal, interest and any
premium made to a holder of the notes who is not a resident of Australia and
who does not carry on business through a permanent establishment in Australia,
will not be subject to Australian income or withholding tax.
The exemption from Australian withholding tax will also not apply to
interest paid by the issuer trustee to an associate of the issuer trustee
within the meaning of section 128F of the Tax Act, which, as discussed, would
be an associate of the residual beneficiary, if, at the time of the payment,
the issuer trustee knows, or has reasonable grounds to suspect, that the person
is an associate.
NOTE TRANSFERS
A noteholder may be subject to taxation in respect of any gain made on the
transfer of notes. The specific taxation implications in respect of the
transfer depends on the nature of the gain which will vary as between
noteholders. Broadly, the taxation consequences will depend on whether
noteholders own the notes on revenue or capital account.
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Noteholders should seek their own advice in relation to the specific
taxation consequences of the transfer of their notes.
In addition, noteholders should also seek their own advice regarding the
goods and services tax implications of the transfer of their notes.
PROFIT ON SALE
Under existing Australian law, non-resident holders of notes will not be
subject to Australian income tax on profits derived from the sale or disposal
of the notes provided that:
o the notes are not held as part of a business carried on, at or through a
permanent establishment in Australia; and
o the profits do not have an Australian source.
The source of any profit on the disposal of notes will depend on the
factual circumstances of the actual disposal. Where the notes are acquired and
disposed of pursuant to contractual arrangements entered into and concluded
outside Australia, and the seller and the purchaser are non-residents of
Australia and do not have a business carried on, at or through a permanent
establishment in Australia, the profit should not have an Australian source.
There are, however, specific withholding tax rules that can apply to treat
a portion of the sale price of notes as interest for withholding tax purposes
and which amounts are not covered by the exemption in section 128F of the Tax
Act. These rules can apply when:
o notes are sold for any amount in excess of their issue price prior to
maturity to a purchaser who is either a resident who does not acquire
the notes in the course of carrying on business in a country outside
Australia at or through a permanent establishment in that country or a
non-resident that acquires the notes in the course of carrying on a
business in Australia at or through a permanent establishment in
Australia; or
o notes are sold to an Australian resident in connection with a "washing
arrangement" as defined in the Tax Act.
GOODS AND SERVICES TAX
The goods and services tax regime was introduced in Australia from July 1,
2000.
The goods and services tax (GST) is a transactions tax and accordingly may
impact various transactions in which the issuer trustee is involved. Broadly,
the impact of the goods and services tax regime will depend on the type of
supply made by the issuer trustee.
Where the supply by the issuer trustee is a "taxable supply", the issuer
trustee will have to remit goods and services tax equal to 1/11th of the total
consideration received for the supply to the Australian Taxation Office (ATO).
The issuer trustee can obtain full input tax credits for goods and services tax
paid on things acquired to make the taxable supply.
Where the supply by the issuer trustee is a "GST free supply", the issuer
trustee does not remit goods and services tax on the supply to the ATO. The
issuer trustee can obtain full input tax credits for goods and services tax
paid on things acquired to make the GST free supply.
Where the supply by the issuer trustee is an "input taxed supply", which
includes financial supplies, the issuer trustee is not required to remit goods
and services on the supply. The issuer trustee is generally not entitled to
input tax credits for goods and services tax paid on things acquired to make
input taxed supplies. In some circumstances, however, "reduced input tax
credits" may be available.
On the basis of the current goods and services tax legislation, the issue
of the notes would constitute either a financial supply or a GST-free supply
depending on the status of the noteholders. In either case GST is not charged
in respect of the supply. Payments made to noteholders would not constitute a
separate supply for GST purposes.
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FIXED-FLOATING RATE SWAP & GST
Where the fixed-floating rate swap provider is an Australian resident, the
GST implications under current Australian law are as follows:
o the exchange of fixed interest rate obligations for floating interest
rate obligations by the issuer trustee would constitute a financial
supply. Accordingly, the issuer trustee would not be obliged to remit
GST to the ATO and would not be entitled to claim full input tax credits
in relation to the costs associated with making the supply, although the
issuer trustee may be entitled to claim a reduced input tax credit; and
o the exchange of floating interest rate obligations for fixed interest
rate obligations by the fixed-floating rate swap provider would also
constitute a financial supply.
Where the fixed-floating rate swap provider is not an Australian resident,
the GST implications under current Australian law are as follows:
o the supply of fixed interest rate obligations for floating interest rate
obligations by the issuer trustee to the non-resident fixed-floating
rate swap provider, constitutes a GST-free supply. Accordingly, the
issuer trustee is not required to remit GST to the ATO, however, the
issuer trustee is entitled to claim input taxed credits in relation to
the costs associated with making this supply; and
o the supply of floating interest rate obligations for fixed interest rate
obligations by the non-resident fixed-floating rate swap provider to the
issuer trustee has no impact for GST purposes.
CURRENCY SWAP PROVIDER & GST
Where the currency swap provider is an Australian resident, the GST
implications under current Australian law are as follows:
o the exchange of currency denominations by the issuer trustee would
constitute a financial supply. Accordingly, the issuer trustee would not
be obliged to remit GST to the ATO and would not be entitled to claim
full input tax credits in relation to the costs associated with making
the supply, although the issuer trustee may be entitled to claim a
reduced input tax credit; and
o the exchange of currency denominations by the currency swap provider
would also constitute a financial supply.
Where the currency swap provider is not an Australian resident, the GST
implications under current Australian law are as follows:
o the supply of currency denominations by the issuer trustee to the
non-resident currency swap provider, constitutes a GST-free supply.
Accordingly, the issuer trustee is not required to remit GST to the ATO,
however, the issuer trustee is entitled to claim input taxed credits in
relation to the costs associated with making this supply; and
o the supply of currency denominations by the non-resident currency swap
provider to the issuer trustee has no impact for GST purposes.
OTHER TAXES
No stamp, issue, registration or similar taxes are payable in Australia in
connection with the issue of the Class A2 notes. Furthermore, a transfer of, or
agreement to transfer, notes executed outside of Australia should not be
subject to Australian stamp duty.
TAX REFORM PROPOSALS
Under the Review of Business Taxation recommendations it was proposed that
some trusts be taxed as if they were companies as from July 1, 2001. The
Australian Federal Government released draft
110
legislation to implement these recommendations. The draft legislation provided
that non-fixed trusts would be taxed as if they were companies. Fixed trusts,
however, would not be subject to the proposed measures and would therefore
retain their current taxation treatment and accordingly will continue to
receive flow-through treatment. The Exposure Draft Legislation was subject to
an extensive consultation process. As a result of this process, the Australian
Federal Government resolved that the Exposure Draft Legislation involved
numerous complications, therefore it has since been withdrawn.
The Australian Federal Government may issue new draft rules in relation to
the taxation of trusts in the future, however the form and proposed state date
of these measures remain uncertain.
In any case, the measures should in no way impact the payment to
noteholders who will continue to receive their interest payments in respect of
the notes issued by the issuer trustee.
DEBT & EQUITY
The New Business Tax System (Debt and Equity) Act 2001 was enacted on
October 1, 2001 with effect from July 1, 2001 and amends the Income Tax
Assessment Act 1997 (Cth).
The debt/equity rules recharacterize as equity, for tax purposes, certain
interests in a company which would otherwise be regarded as debt. In so doing,
a tax deduction is denied for any interest paid on such "non-share equity".
The notes on issue have the following attributes:
o the notes are not convertible to equity;
o interest payment in respect of the notes is based on a specific formula;
o the rights attaching to the notes and the amount of the return is not
subject to the discretion of the issuer trustee.
In light of the debt/equity rules, the notes issued by the issuer should
constitute debt.
ENFORCEMENT OF FOREIGN JUDGMENTS IN AUSTRALIA
Interstar Securitisation Management Pty Limited is an Australian private
company incorporated with limited liability under the Corporations Act 2001 of
Australia. Any final and conclusive judgment of any New York State or United
States Federal Court sitting in the Borough of Manhattan in the City of New
York having jurisdiction recognized by the relevant Australian jurisdiction in
respect of an obligation of Interstar Securitisation Management Pty Limited in
respect of a note, which is for a fixed sum of money and which has not been
stayed or satisfied in full, would be enforceable by action against Interstar
Securitisation Management Pty 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
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Management Pty Limited has appointed CT Corporation System, 111 Eighth Avenue,
13th Floor, New York, New York 10011, as its agent upon whom process may be
served in any such action.
All of the directors and executive officers of Interstar Securitisation
Management Pty Limited, and certain experts named in this prospectus, reside
outside the United States in the Commonwealth of Australia. Substantially all
or a substantial portion of the assets of all or many of such persons are
located outside the United States. As a result, it may not be possible for
holders of the notes to effect service of process within the United States upon
such persons or to enforce against them judgments obtained in United States
courts predicated upon the civil liability provisions of federal securities
laws of the United States. Interstar Securitisation Management Pty Limited has
been advised by its Australian counsel, Allens Arthur Robinson, that, based on
the restrictions discussed in this section, there is doubt as to the
enforceability in the Commonwealth of Australia, in original actions or in
actions for enforcement of judgments of United States courts, of civil
liabilities predicated upon the federal securities laws of the United States.
EXCHANGE CONTROLS AND LIMITATIONS
Under certain instruments issued by the Reserve Bank of Australia under
the Banking (Foreign Exchange) Regulations, the specific prior approval of the
Reserve Bank of Australia must be obtained for certain payments to be made in
or from Australia to, by the order of, on behalf of, or relating to property,
securities or funds belonging to or controlled by:
o the Government of Iraq or its agencies or its nationals;
o known supporters of the former Milosevic regime of the Federal Republic
of Yugoslavia;
o the Government or a public authority of Libya or certain Libyan
undertakings;
o the Taliban, including the Islamic Emirate of Afghanistan, or any
undertaking owned or controlled by the Taliban;
o Osama bin Laden, the Al-Qaeda organization and certain other individuals
identified by the Reserve Bank of Australia as being linked to
terrorism; or
o UNITA, being the United Union for the Total Independence of Angola, its
senior officials and their immediate families.
ERISA CONSIDERATIONS
Subject to the considerations discussed in this section, the Class A2
notes are eligible for purchase by employee benefit plans.
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh plans from engaging in certain transactions
with persons that are "parties in interest" under ERISA or "disqualified
persons" under Section 4975 of the Code with respect to these Benefit Plans. A
violation of these "prohibited transaction" rules may result in an excise tax
or other penalties and liabilities under ERISA and the Code for these persons.
Title I of ERISA also requires that fiduciaries of a Benefit Plan subject to
ERISA make investments that are prudent, diversified, except if prudent not to
do so, and in accordance with governing plan documents.
Some transactions involving the purchase, holding or transfer of the Class
A2 notes might be deemed to constitute prohibited transactions under ERISA and
Section 4975 of the Code if assets of the trust were deemed to be assets of a
Benefit Plan. Under a regulation issued by the United States Department of
Labor, the assets of the trust would be treated as plan assets of a Benefit
Plan for the purposes of ERISA and Section 4975 of the Code only if the Benefit
Plan acquires an "equity interest" in the trust and none of the exceptions
contained in the regulation is applicable. An equity interest is defined under
the regulation as an interest in an entity other than an instrument which is
treated as indebtedness under applicable local law and which has no substantial
equity features. Although there
112
can be no assurances in this regard, it appears, at the time of their initial
issuance that the notes should be treated as debt without substantial equity
features for purposes of the regulation and that the notes do not constitute
equity interests in the trust for purposes of the regulation. The debt
characterization of the notes could change after their initial issuance if the
trust incurs losses.
However, without regard to whether the Class A2 notes are treated as an
equity interest for these purposes, the acquisition or holding of the notes by
or on behalf of a Benefit Plan could be considered to give rise to a prohibited
transaction if the trust, the issuer trustee, the servicer, a backup servicer,
the trust manager, the note trustee, the seller, a swap provider, the
underwriters or the security trustee is or becomes a party in interest or a
disqualified person with respect to these Benefit Plans. In such case, certain
exemptions from the prohibited transaction rules could be applicable depending
on the type and circumstances of the plan fiduciary making the decision to
acquire a note. Included among these exemptions are:
o Prohibited Transaction Class Exemption 96-23, regarding transactions
effected by "in-house asset managers";
o Prohibited Transaction Class Exemption 95-60, regarding transactions
effected by "insurance company general accounts";
o Prohibited Transaction Class Exemption 91-38, regarding investments by
bank collective investment funds;
o Prohibited Transaction Class Exemption 90-1, regarding investments by
insurance company pooled separate accounts; and
o Prohibited Transaction Class Exemption 84-14, regarding transactions
effected by "qualified professional asset managers".
By your acquisition of a Class A2 note, you shall be deemed to represent
and warrant that your purchase and holding of the note will not result in a
non-exempt prohibited transaction under ERISA or Section 4975 of the Code.
Employee benefit plans that are governmental plans, as defined in Section
3(32) of ERISA, and certain church plans, as defined in Section 3(33) of ERISA,
are not subject to ERISA requirements; however, governmental plans may be
subject to comparable state law restrictions.
If you are a plan fiduciary considering the purchase of any of the Class
A2 notes, you should consult your tax and legal advisors regarding whether the
assets of the Trust would be considered plan assets, the possibility of
exemptive relief from the prohibited transaction rules and other issues and
their potential consequences.
LEGAL INVESTMENT CONSIDERATIONS
The Class A2 notes will not constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984, because the
originator of the housing loans was not subject to United States state or
federal regulatory authority. Accordingly, some United States institutions with
legal authority to invest in comparably rated securities based on such housing
loans may not be legally authorized to invest in the Class A2 notes. No
representation is made as to whether the notes constitute legal investments
under any applicable statute, law, rule, regulation or order for any entity
whose investment activities are subject to investment laws and regulations or
to review by any regulatory authorities. You are urged to consult with your
counsel concerning the status of the Class A2 notes as legal investments for
you.
AVAILABLE INFORMATION
Interstar Securitisation Management Pty Limited, as trust manager, has
filed with the SEC a registration statement under the United States Securities
Act of 1933 (SECURITIES ACT) with respect to the Class A2 notes offered
pursuant to this prospectus. For further information, reference should be made
to
113
the registration statement and amendments thereof and to the exhibits thereto,
which are available for inspection without charge at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549; and at the SEC's regional offices at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of the registration statement, including
any amendments or exhibits, may be obtained from the Public Reference Section
of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The SEC also maintains a World Wide Web site which provides on-line
access to reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC at the address
"http://www.sec.gov".
RATINGS OF THE NOTES
The issuance of the Class A2 notes will be conditioned on obtaining a
rating of AAA by S&P and Aaa by Moody's. The issuance of the Class B notes will
be conditioned on obtaining a rating of AA- by S&P. You should independently
evaluate the security ratings of each class of notes from similar ratings on
other types of securities. A security rating is not a recommendation to buy,
sell or hold securities. A rating does not address the market price or
suitability of the notes for you. A rating may be subject to revision or
withdrawal at any time by the rating agencies. The rating does not address the
expected schedule of principal repayments other than to say that principal will
be returned no later than the final maturity date of the notes. The ratings of
the Class A2 notes will be based primarily on the creditworthiness of the
housing loans, the subordination provided by the Class B notes with respect to
the Class A2 notes, the mortgage insurance policies and title insurance
policies, the creditworthiness of the swap providers and the mortgage insurers
and the foreign currency rating of Australia. The Commonwealth of Australia's
current foreign currency long term debt rating is AA+ by S&P and Aa2 by
Moody's. In the context of an asset securitization, the foreign currency rating
of a country reflects, in general, a rating agency's view of the likelihood
that cash flow on the assets in such country's currency will be permitted to be
sent outside of that country. None of the rating agencies have been involved in
the preparation of this prospectus.
PLAN OF DISTRIBUTION
UNDERWRITING
Under the terms and subject to the conditions contained in the
underwriting agreement among the underwriters, the issuer trustee and the trust
manager, the issuer trustee has agreed to sell to the underwriters the entire
Principal Amount of the Class A2 notes:
PRINCIPAL AMOUNT OF
CLASS A2 NOTES
UNDERWRITERS (US$)
- ------------------------------------- --------------------
Barclays Capital Inc ................ $ 887,000,000
J.P. Morgan Securities Inc. ......... $ 75,000,000
Macquarie Bank Limited .............. $ 38,000,000
Total ............................... $1,000,000,000
The underwriting agreement provides that the underwriters are obligated to
purchase all of the Class A2 notes if any are purchased.
The underwriters propose to offer the Class A2 notes initially at the
public offering prices on the cover page of this prospectus and to selling
group members at the price less a concession not in excess of the respective
amounts set forth in the following table, expressed as a percentage of the
principal balance. The underwriters and selling group members may reallow a
discount not in excess of the respective amounts set forth in the following
table to other brokers and dealers. After the initial public offering, the
public offering price and concessions and discounts to brokers and dealers may
be changed by the representative of the underwriters.
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SELLING REALLOWANCE
CONCESSIONS DISCOUNT
------------- -------------
Class A 2 notes ......... 0.099% 0.0495%
The trust manager estimates that the out-of-pocket expenses for this
offering will be approximately US$1,007,000.
The trust manager has agreed to indemnify the underwriters against civil
liabilities under the Securities Act, or contribute to payments which the
underwriters may be required to make in that respect.
The underwriting discounts and commissions will be equal to $1,650,000.
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 Class A2 notes.
The underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Exchange Act.
o Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position;
o Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum;
o Syndicate covering transactions involve purchases of the Class A2 notes
in the open market after the distribution has been completed in order to
cover syndicate short positions;
o Penalty bids permit the underwriters to reclaim a selling concession
from a syndicate member when the Class A2 notes originally sold by a
syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions.
Stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the Class A2 notes to be higher than it would otherwise
be in the absence of these transactions. These transactions, if commenced, may
be discontinued at any time.
In the ordinary course of its business, the underwriters and some of their
affiliates have in the past and may in the future engage in commercial and
investment banking activities with the trust manager and its affiliates.
OFFERING RESTRICTIONS
THE UNITED KINGDOM
The Class A2 notes have only been offered or sold and will only be offered
or sold in or from the United Kingdom: (a) to persons (i) whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments, as principal or agent, for the purposes of their businesses; or
(ii) to persons who it is reasonable to expect will acquire, hold, manage or
dispose of investments, as principal or agent, for the purposes of their
businesses; or (iii) otherwise in circumstances that have not resulted and will
not result in an offer to the public under the Public Offers of Securities
Regulations 1995 (as amended); and (b) in compliance with all applicable
provisions of the Financial Services and Markets Act 2000 (FISMA), and rules
and regulations made thereunder with respect to anything done in relation to
the Class A2 notes in, from or otherwise involving the United Kingdom. Any
invitation or inducement to engage in investment activity, within the meaning
of Section 21 of FISMA, will only be communicated or caused to be communicated
in circumstances when Section 21 of FISMA does not apply, including to persons
exempted as investment professionals under Article 19 or to high net worth
persons under Article 49 of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2001, as amended.
Neither this prospectus nor the Class A2 notes have been, or will be,
available to other categories of persons in the United Kingdom and no-one
falling outside such categories is entitled to rely on, and
115
must not act on, any information in this prospectus. The transmission of this
prospectus to any person in the United Kingdom other than the categories stated
above is unauthorized and may contravene FISMA.
AUSTRALIA
No offering circular, prospectus or other disclosure document in relation
to any notes has been lodged with the Australian Securities and Investments
Commission. The Class A2 notes may not, in connection with their initial
distribution, be offered or sold, directly or indirectly, in the Commonwealth
of Australia, its territories or possessions, or to any resident of Australia.
Each underwriter has agreed that it:
o has not, directly or indirectly, offered for issue or sale or invited
applications for the issue of or for offers to purchase nor has it sold
the Class A2 notes;
o will not, directly or indirectly, offer for issue or sale or invited
applications for the issue of or for offers to purchase nor will it sell
the Class A2 notes; and
o has not distributed and will not distribute any draft, preliminary or
definitive offering circular, or any advertisement or other offering
material,
in Australia, its territories or possessions unless:
o the amount payable for the Class A2 notes on acceptance of the offer by
each offeree or invitee is a minimum amount of A$500,000, or its
equivalent in another currency -- disregarding amounts, if any, lent by
the issuer trustee or other person offering the notes or any associate
of them -- or the offer or invitation is otherwise an offer or
invitation for which no disclosure is required to be made under Part
6D.2 of the Corporations Act 2001 of Australia;
o the offer, invitation or distribution complies with all applicable laws,
regulations and directives in relation to the offer, invitation or
distribution and does not require any document to be lodged with the
Australian Securities and Investments Commission; and
o the Class A2 notes will not be acquired by an associate of the issuer
trustee within the meaning of section 128F of the Tax Act, other than in
the capacity of a dealer, trust manager or underwriter in relation to a
placement of the Class A2 notes, as identified on a list provided by the
trust manager, the LIST.
In addition, each underwriter has agreed that, in connection with the
primary distribution of the Class A2 notes, it will not sell any Class A2 notes
to any person if, at the time of such sale, the employees of the underwriter
aware of, or involved in, the sale know, or have reasonable grounds to suspect
that, as a result of such sale, such Class A2 notes or any interest in such
Class A2 notes were being, or would later be acquired, directly or indirectly,
by an associate of the issuer trustee for the purposes of section 128F of the
Tax Act.
Each underwriter has agreed that it must offer the Class A2 notes for
which they subscribe for sale within 30 days of the issue of those Class A2
notes. Such offer must only be by one of the following means, or a combination
thereof:
o as a result of negotiations being initiated by 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 Class A2 notes
are offered for sale; or
o by the underwriter offering those Class A2 notes for sale to at least 10
persons, each an INVESTOR, each of whom must be:
o carrying on a business of providing finance, or investing or dealing
in securities, in the course of operating in the financial markets;
and
o not known to be an associate of any of the others;
116
o as a result of being accepted for listing on a stock exchange where the
issuer trustee has previously entered into an agreement with the
underwriter in relation to the placement of the Class A2 notes requiring
the issuer trustee to seek such listing; or
o to at least 100 persons who it would be reasonable to regard as either
having acquired instruments similar to the Class A2 notes in the past or
as likely to be interested in acquiring Class A2 notes.
117
GENERAL INFORMATION
LISTING
Applications have been made to list the Class A2 notes on the Luxembourg
Stock Exchange and the Australian Stock Exchange. In connection with the
listing application to the Luxembourg Stock Exchange, copies of the
constitutional documents of the issuer trustee and the legal notice relating to
the issuance of the Class A2 notes will be deposited with the Chief Registrar
of the District Court of Luxembourg, Greffier en Chef du Tribunal
d'Arrondissement de et a Luxembourg, where such documents may be examined and
copied upon request.
The Bank of New York (Luxembourg) S.A. will initially act as the
Luxembourg listing agent, Luxembourg paying agent and Luxembourg transfer
agent. Each of these agents agree that so long as the Class A2 notes are listed
on the Luxembourg Stock Exchange, such agents will be maintained in Luxembourg.
Any changes thereto must be notified to the Class A2 noteholders in accordance
with the notice provisions set forth under the heading "Description of the
Class A2 Notes -- Notices".
AUTHORIZATION
The issuer trustee has obtained all necessary consents, approvals and
authorizations in connection with the issue and performance of the Class A2
notes. The issue of the Class A2 notes has been authorized by the resolutions
of the board of directors of Perpetual Trustees Victoria Limited passed on July
9, 2002.
LITIGATION
The issuer trustee is not, and has not been, involved in any litigation or
arbitration proceedings that may have, or have had during the twelve months
preceding the date of this prospectus, a significant effect on its financial
position nor, so far as it is aware, are any such litigation or arbitration
proceedings pending or threatened.
EUROCLEAR AND CLEARSTREAM, LUXEMBOURG
The Class A2 notes have been accepted for clearance through Euroclear and
Clearstream, Luxembourg with the Common Code number 015120517 and ISIN
USQ4967YAA84.
TRANSACTION DOCUMENTS AVAILABLE
You may obtain copies of the noteholders' reports to Class A2 noteholders
during normal business hours on a weekday, excluding Saturdays, Sundays and
public holidays, at the specified offices of the Luxembourg paying agent, with
initial specified offices located at Aerogolf Center, 1A, Hoehenhof, L- 1736
Senningerberg, Luxembourg.
You may inspect copies of the following documents during normal business
hours on any weekday, excluding Saturdays, Sundays and public holidays, at the
specified offices of the Luxembourg Paying Agent, with initial specified
offices located at Aerogolf Center, 1A, Hoehenhof, L-1736 Senningerberg,
Luxembourg, during the period of fourteen days from the date of this
prospectus:
o constitution of the issuer trustee;
o underwriting agreement;
o master trust deed;
o series notice;
o security trust deed;
o note trust deed;
o agency agreement;
118
o investment management agreement;
o currency swap;
o currency swap guarantee;
o primary backup servicer agreement; and
o secondary backup servicer agreement.
ANNOUNCEMENT
By distributing or arranging for the distribution of this prospectus to
the underwriters and the persons to whom this prospectus is distributed, the
issuer trustee announces to the underwriters and each such person that:
o the Class A2 notes will initially be issued in the form of 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 Class A2
notes to the noteholders and will record the existence of those rights;
and
o as a result of the issue of the Class A2 notes in this manner, these
rights will be created.
LEGAL MATTERS
Mayer, Brown, Rowe & Maw, New York, New York, will pass upon some legal
matters with respect to the Class A2 notes, including the material U.S. federal
income tax matters, for Interstar Securitisation Management Pty Limited. Allens
Arthur Robinson, Sydney, Australia, will pass upon some legal matters,
excluding any Australian tax matters, with respect to the Class A2 notes for
Interstar Securitization Management Pty Limited. KPMG will pass upon the
Australian tax matters with respect to the Class A2 notes for Interstar
Securitisation Management Pty Limited. Orrick, Herrington & Sutcliffe, London,
United Kingdom will act as United States legal counsel to the underwriters.
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DIRECTORY
TRUST MANAGER
INTERSTAR SECURITISATION MANAGEMENT PTY LIMITED
Level 28, 367 Collins Street,
Melbourne, Australia
SERVICER
INTERSTAR SECURITIES (AUSTRALIA) PTY LIMITED
Level 28, 367 Collins Street
Melbourne, Australia
ISSUER TRUSTEE
PERPETUAL TRUSTEES VICTORIA LIMITED
Level 7, 9 Castlereagh Street
Sydney, New South Wales, Australia
SECURITY TRUSTEE
PERPETUAL TRUSTEE COMPANY LIMITED
Level 7, 9 Castlereagh Street
Sydney, New South Wales, Australia
NOTE TRUSTEE, PRINCIPAL PAYING AGENT AND CALCULATION AGENT
THE BANK OF NEW YORK
101 Barclay Street, New York, New York 10286
United States of America
LUXEMBOURG PAYING AGENT, TRANSFER AGENT AND LISTING AGENT
THE BANK OF NEW YORK (LUXEMBOURG) S.A.
Aerogolf Center, 1A, Hoehenhof
L-1736 Senningerberg Luxembourg
AUSTRALIAN COUNSEL FOR THE TRUST MANAGER
Allens Arthur Robinson
2 Chifley Square
Sydney, New South Wales, Australia
UNITED STATES COUNSEL TO UNITED STATES COUNSEL TO
THE TRUST MANAGER THE UNDERWRITER
Mayer, Brown, Rowe & Maw Orrick, Herrington & Sutcliffe
1675 Broadway 4 Broadgate
New York, New York 10019 London EC2M 2DA
United States of America United Kingdom
UNITED STATES COUNSEL TO AUSTRALIAN COUNSEL TO
THE NOTE TRUSTEE THE ISSUER TRUSTEE
Tite & Lewis Mallesons Stephen Jaques
Alder Castle, 10 Noble Street Governor Phillip Tower
London EC2V 7TL 1 Farrer Place
United Kingdom Sydney, New South Wales, Australia
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GLOSSARY
A$ EQUIVALENT............... means, in relation to an amount denominated or
to be denominated in US$:
o prior to the termination of the currency
swap, the amount converted to and
denominated in A$ at the rate of exchange
set forth in the currency swap for the
exchange of United States dollars for
Australian dollars; and
o after the termination of the currency swap,
the amount that, when converted into US$ at
the then prevailing spot exchange rate in
New York City for A$ purchases of US$, will
equal the US$ amount owing in respect of
principal or interest, as applicable, on the
Class A2 notes to be paid from or by
reference to such amount.
A$ INTEREST AMOUNT.......... means, in relation to a monthly payment date,
the amount in Australian dollars calculated as
follows:
o on a daily basis at the Bank Bill Rate on
that day plus a margin set forth in the
currency swap that will increase after the
Step-Up Margin Date;
o on the A$ Equivalent of the Currency Swap
Notional Amount for that monthly payment
date; and
o on the basis of the actual number of days in
the relevant Interest Period and a year of
365 days.
ACCRUED INTEREST
ADJUSTMENT.................. means, in relation to a seller, the amount equal
to any interest and fees accrued on the housing
loans purchased from that seller up to, but
excluding, the closing date and which were unpaid
as of the close of business on the closing date.
APPROVED BANK............... means a bank which has a short term rating of
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
121
o any mortgage-backed security issued
by any entity,
which satisfy the following conditions:
o unless otherwise advised in writing by each
rating agency:
o each proposed investment falling within
bullet points 2, 3 and 4 must have a credit
rating issued by S&P of A-1+ or AAA and by
Moody's of P-1 or Aaa;
o each proposed investment falling within
bullet point 5 must have a credit rating
issued by S&P of AAA and by Moody's of Aaa;
o each proposed investment falling within
bullet points 2, 3 and 4 must mature by the
earlier of the following dates:
o the monthly payment date following the
date on which it was acquired; or
o such other date as the issue trustee
and the trust manager may determine to
be necessary to enable the issuer
trustee to have sufficient cash to meet
any expenses of the trust which may be
payable prior to that monthly
payment date;
o unless the series notice otherwise provides,
all Authorized Investments must be
denominated in Australian currency and held
in Australia; and
o all Authorized Investments must be held in
the name of the issuer trustee or in the
name of such other person or persons as
approved by the issuer trustee from time to
time.
AVAILABLE INCOME............ see page 60.
BANK BILL RATE.............. means as at any date the rate per cent per
annum being the average of the buying and selling
rates for a 30 day bill or, in the case of the
first Interest Period for a Class B note, the
linear interpolation of the average of the buying
and selling rates for cash and a 30 day bill,
quoted on the page designated "BBSW" of the
Reuters Monitor System at or about 10.30 am,
Melbourne time, on that date by each person so
quoting, but not less than five, and rounding the
resultant figure upwards to four decimal places,
provided that if in respect of any date the Bank
Bill Rate cannot be determined because fewer than
five persons have quoted rates or a rate is not
displayed for a term equivalent to that period,
then the BANK BILL RATE for that date shall mean
such rate as determined by a financial advisor
nominated by the trust manager or by the trust
manager having regard to comparable indices then
available. In the event that any such date is not
a business day, then the BANK BILL RATE
applicable on that date
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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.
CAPITAL..................... means any assets of the trust from time to time
which constitute or are attributable to capital
rather than income and includes any Mortgage
Principal Repayments.
CODE........................ see page 105.
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.
CURRENCY SWAP
NOTIONAL AMOUNT................. means as follows:
o in relation to a monthly payment date which
is 2 monthly payment dates immediately
preceding a quarterly payment date, the
aggregate Principal Amount of the Class A2
notes as at the first day of the Interest
Period for that quarterly payment date;
o in relation to a monthly payment date which
is 1 monthly payment date immediately
preceding a quarterly payment date, an
amount equal to:
o the aggregate Principal Amount of the
Class A2 notes as at the first day of
the Interest Period for that quarterly
payment date; minus
o the US$ Equivalent of the amounts
distributed to the currency swap
provider or the note trustee in respect
of principal on the immediately
preceding monthly payment date;
o in relation to a monthly payment date which
is also a quarterly payment date, an amount
equal to:
o the aggregate Principal Amount of the
Class A2 notes as at the first day of
the Interest Period for that quarterly
payment date; minus
o the US$ Equivalent of the amounts
distributed to the currency swap
provider or the note trustee in respect
of principal on the two immediately
preceding monthly payment dates.
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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 60.
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 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
124
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.
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 or the currency
swap in relation to the trust where the
trust manager reasonably believes it may
have a Material Adverse Effect and the
issuer trustee fails or neglects after 30
days' notice from the trust manager to
remedy that breach;
o the issuer trustee merges or consolidates
with another entity without ensuring that
the resulting merged or consolidated entity
assumes the issuer trustee's obligations
under the transaction documents; or
o there is a change in control of the issuer
trustee from that existing on the date of
the master trust deed unless approved by the
trust manager.
LIBOR....................... means, in relation to any Interest Period for a
Class A2 note, the rate applicable for deposits
in U.S. dollars for a period of 3 months - or in
the case of the first Interest Period, the linear
interpolation of the rates applicable for
deposits in U.S. dollars for 2 and 3 months -
which appears on the Telerate Page 3750 as of
11.00 am, London time, on the relevant rate reset
date. If such rate does not appear on the
Telerate Page 3750, the rate for that Interest
Period will be determined as if the issuer
trustee and the calculation agent had specified
USD-LIBOR-Reference Banks as the applicable
Floating Rate Option under the Definitions of the
International Swaps and
125
Derivatives Association, Inc. (ISDA)
incorporating the 2000 ISDA definitions, as
amended and updated as at the closing date (the
ISDA DEFINITIONS). USD-LIBOR-REFERENCE BANKS
means that the rate for an Interest Period for a
Class A2 note 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;
o cash and/or deposits with an Approved Bank,
or the acquisition of certificates of
deposits 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.
LIQUIDITY PURPOSES.......... see page 63.
LVR......................... means in relation to a housing loan, the ratio,
expressed as a percentage, which the outstanding
amount of the housing loan
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secured or to be secured by the related mortgage
bears to the value of the land mortgaged or to
be mortgaged, both at the time the borrower
entered into the relevant housing loan
agreement.
MATERIAL ADVERSE EFFECT..... means an event which will materially and
adversely affect the amount or the timing of a
payment to a noteholder.
MONTHLY PAYMENT DATE........ see page 59.
MORTGAGEES.................. see page 82.
MORTGAGE PRINCIPAL
REPAYMENTS.................. see page 63.
NOTEHOLDER MORTGAGEES....... means the Class B noteholders, the Class A1
noteholders and the note trustee, on behalf of
the Class A2 noteholders.
PREFUNDING ACCOUNT.......... see page 30.
PRESCRIBED MINIMUM LEVEL.... see page 59.
PRIMARY EXPENSES............ see page 60.
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.
QUARTERLY PAYMENT DATE...... see page 58.
SECURED MONEYS.............. means all money which the issuer trustee is or
at any time may become actually or contingently
liable to pay to or for the account of any
Mortgagee for any reason whatever under or in
connection with a transaction document, any
fixed-floating rate swap or the currency swap.
SERVICER TRANSFER EVENT..... see page 90.
STEP-UP MARGIN DATE......... means the quarterly payment date falling in
July 2009.
SURPLUS LIQUIDITY........... means, on any monthly payment date, the amount
by which the value of the Liquid Authorized
Investments exceeds the Prescribed Minimum Level
on such monthly payment date after replenishing
Liquid Authorized Investments used for any Income
Shortfalls.
TERMINATION DATE............ with respect to the trust shall be the earlier
to occur of:
o the date which is 80 years after the date of
creation of the trust;
o the termination of the trust under statute
or general law;
o full and final enforcement by the security
trustee of its rights under the security
trust deed after the occurrence of an event
of default under the security trust deed; or
127
o at any time after all creditors of the trust
have been repaid in full, the business day
immediately following that date.
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 or the 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 or the
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 or the currency swap, or a
document provided under or in connection
with a transaction document, any
fixed-floating rate swap and the 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.
US$ EQUIVALENT.............. means, in relation to an amount denominated or
to be denominated in A$:
o prior to the termination of the currency
swap, the amount converted to and
denominated in US$ at the rate of exchange
set forth in the currency swap for the
exchange of Australian dollars for United
States dollars; and
128
o after the termination of the currency swap,
the amount that, when converted into A$ at
the then prevailing spot exchange rate in
New York City for US$ purchases of A$, will
equal the A$ amount needed to convert into
US$ to pay principal or interest, as
applicable, on the Class A2 notes.
VOTING MORTGAGEES........... see page 84.
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INTERSTAR MILLENNIUM SERIES 2002-1G TRUST
$1,000,000,000 CLASS A2 MORTGAGE BACKED FLOATING RATE NOTES
-------------------------
PROSPECTUS
-------------------------
UNDERWRITERS OF THE CLASS A2 NOTES
BARCLAYS CAPITAL
JP MORGAN MACQUARIE BANK
LONDON BRANCH
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 October 9, 2002, 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.
================================================================================