The attached Prospectus dated March 8, 2004 (the "Prospectus") relating to
the US$1,000,000,000 Class A Mortgage Backed Floating Rate Notes, (the "Class A
Securities") US$49,000,00 Class AB Mortgage Backed Floating Rate Notes (the
"Class AB Securities") and Class B US$17,100,000 Mortgage Backed Floating Rate
Notes (together with the Class A Securities and the Class AB Securities, the
"Securities") issued by Interstar Millenium Series 2004-2G Trust (the "Issuer")
was originally filed on March 8, 2004 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.
INTERSTAR MILLENNIUM SERIES 2004-2G TRUST
US$1,000,000,000 CLASS A MORTGAGE BACKED FLOATING RATE NOTES
US$49,000,000 CLASS AB MORTGAGE BACKED FLOATING RATE NOTES
US$17,100,000 CLASS B MORTGAGE BACKED FLOATING RATE NOTES
[GRAPHIC OMITTED]
INTERSTAR SECURITISATION MANAGEMENT PTY LIMITED
(ABN 56 100 346 898)
TRUST MANAGER
PERPETUAL TRUSTEES VICTORIA LIMITED
(ABN 47 004 027 258)
ISSUER TRUSTEE
The Class A notes, the Class AB notes and the Class B notes,
collectively the US$ notes, will be collateralized by a pool of housing loans
secured by properties located in Australia. The Interstar Millennium Series
2004-2G Trust will be governed by the laws of New South Wales, Australia.
The US$ notes are not deposits and neither the US$ notes nor the
underlying housing loans are insured or guaranteed by any governmental agency or
instrumentality. The US$ notes represent obligations of Perpetual Trustees
Victoria Limited solely in its capacity as trustee of the Interstar Millennium
Series 2004-2G Trust and do not represent obligations of, or interests in,
Interstar Securitisation Management Pty Limited or Perpetual Trustees Victoria
Limited in any other capacity, and are not guaranteed by Interstar
Securitisation Management Pty Limited or Perpetual Trustees Victoria Limited.
INVESTING IN THE US$ NOTES INVOLVES RISKS - SEE "RISK FACTORS" ON PAGE 17.
UNDERWRITING
INITIAL PRINCIPAL INITIAL DISCOUNTS AND PROCEEDS TO ISSUER
BALANCE INTEREST RATE PRICE TO PUBLIC COMMISSIONS TRUSTEE*
------- ------------- --------------- ----------- --------
Class A notes US$1,000,000,000 LIBOR+0.20% US$1,000,000,000 US$1,200,000 or US$1,000,000,000
or 100% 0.12% or 100%
Class AB notes US$49,000,000 LIBOR+0.33% US$49,000,000 US$58,800 or 0.12% US$49,000,000 or
or 100% 100%
Class B notes US$17,100,000 LIBOR +0.63% US$17,100,000 US$20,520 or 0.12% US$17,100,000 or
or 100% 100%
An application will be made to have the US$ notes listed on the
Australian Stock Exchange.
Delivery of the US$ notes in book-entry form through The Depository
Trust Company, Clearstream, Luxembourg and the Euroclear System will be made on
or about March 11, 2004.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the US$ notes or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
UNDERWRITERS OF THE CLASS A NOTES, THE CLASS AB NOTES AND THE CLASS B NOTES
BARCLAYS CAPITAL JPMORGAN
DEUTSCHE BANK SECURITIES
The date of this prospectus is March 8, 2004
- --------------------------------------------------------------------------------
* The underwriting discounts and commissions will be paid separately by
Interstar Securities (Australia) Pty Limited and not from the proceeds to
the issuer trustee.
TABLE OF CONTENTS
PAGE
----
Disclaimers With Respect to Sales to Non-U.S. Investors........................v
Australian Disclaimers......................................................viii
Summary .......................................................................1
Parties to the Transaction............................................1
Structural Diagram....................................................3
Summary of the Notes..................................................4
Structural Overview...................................................5
Credit Enhancements...................................................5
Liquidity Enhancement.................................................7
Redraws ..............................................................7
Hedging Arrangements..................................................8
Optional Redemption...................................................8
Prefunding............................................................9
The Housing Loan Pool................................................10
Selected Housing Loan Pool Data as of Close of Business on
January 29, 2004..................................................10
Withholding Tax......................................................11
U.S. Tax Status......................................................11
Australian Tax Status................................................11
Legal Investment.....................................................11
ERISA Considerations.................................................11
Book-Entry Registration..............................................11
Collections..........................................................12
Interest on the Notes................................................12
Principal on the Notes...............................................13
Allocation of Cash Flows.............................................13
Distribution of Income on Each Payment Date...................................14
Distribution of Mortgage Principal Repayments, Liquid Authorized Investments
and Recovery Amounts on Each Payment Date............................16
Risk Factors..................................................................17
Capitalized Terms.............................................................31
U.S. Dollar Presentation......................................................31
The Issuer Trustee, the Trust Manager and the Servicer........................32
The Issuer Trustee...................................................32
The Trust Manager....................................................32
The Servicer.........................................................33
The Seller...........................................................35
The Backup Servicer..................................................35
Description of the Trust......................................................36
Interstar Millennium Trusts Securitization Program...................36
Interstar Millennium Series 2004-2G Trust............................36
Description of the Assets of the Trust........................................37
Assets of the Trust..................................................37
The Housing Loans....................................................37
Acquisition of Housing Loans after the Closing Date..................38
Transfer and Assignment of the Housing Loans.........................38
Representations, Warranties and Eligibility Criteria.................39
Breach of Representations and Warranties.............................43
i
TABLE OF CONTENTS
(continued)
PAGE
----
Other Features of the Housing Loans..................................43
Details of the Housing Loan Pool.....................................44
Housing Loan Information......................................................45
Analysis of the Housing Loan Pool.............................................45
Housing Loans By Occupancy....................................................45
Housing Loans By LVR (Loan-To-Value Ratio)....................................46
Housing Loans By Product Types................................................46
Housing Loans By Geographical Distribution....................................47
Housing Loans By Loan Size....................................................47
Housing Loans By Postcode Concentration-- Top 10 By Loan Amount..............48
Housing Loans By Loan Seasoning...............................................48
Housing Loans By Maturity.....................................................49
Housing Loans By Mortgage Insurer.............................................49
Housing Loans By Mortgage Insurer and LVR PMI Mortgage Insurance..............50
Mortgage Loans By Mortgage Insurer and LVR PMI Indemnity......................51
Mortgage Loans By Mortgage Insurer and LVR GE Capital Mortgage Insurance......51
Mortgage Loans By Mortgage Insurer and LVR GE Mortgage Insurance (HLIC).......52
Housing Loans By Current Coupon Rates.........................................52
Housing Loans By Months Remaining to Maturity.................................53
Housing Loans By Interest Only Period Remaining...............................53
Housing Loans By Loan Type....................................................53
Interstar Residential Loan Program............................................54
Origination Process..................................................54
Approval and Underwriting Process....................................54
General Features of the Housing Loans................................57
Special Features of the Housing Loans................................58
The Mortgage Insurance Policies...............................................60
General .............................................................60
Certain Provisions of Mortgage Insurance Policies....................60
Description of the Mortgage Insurers.................................62
The Title Insurance Policies..................................................64
Cover ............................................................64
Period of Cover......................................................64
Refusal or Reduction in Claim........................................65
Exclusions...........................................................65
Description of Title Insurer.........................................66
Description of the US$ Notes..................................................67
General .............................................................67
Form of the US$ Notes................................................67
Distributions on the Notes...........................................71
Key Dates and Periods................................................72
Example Calendar.....................................................73
Calculation of Income................................................73
Income ..............................................................73
Application of Mortgage Principal Repayments and Liquid Authorized
Investments to Available Income...................................73
Distribution of Available Income.....................................74
ii
TABLE OF CONTENTS
(continued)
PAGE
----
Additional Income Payments...........................................76
Interest on the Notes................................................77
Mortgage Principal Repayments........................................78
Principal Distributions..............................................78
Charge-Offs..........................................................82
Payments Into US$ Account............................................82
Payments Out of US$ Account..........................................82
Notices .............................................................83
Fixed-Floating Rate Swaps............................................83
The Currency Swaps...................................................85
Redemption of the Notes for Taxation or Other Reasons................90
Redemption of the Notes upon an Event of Default.....................91
Optional Redemption of the Notes.....................................91
Final Maturity Date..................................................93
Final Redemption of the Notes........................................93
Termination of the Trust.............................................93
Prescription.........................................................94
Reports to Noteholders...............................................95
Voting and Consent of Noteholders....................................96
Description of the Transaction Documents......................................97
Trust Accounts.......................................................97
Modifications........................................................97
The Issuer Trustee...................................................98
The Trust Manager...................................................101
The Note Trustee....................................................102
Note Trustee's Annual Report........................................104
List of Noteholders.................................................104
Reports ............................................................104
The Security Trust Deed.............................................104
The Investment Management Agreement.................................114
The Backup Servicer Agreement.......................................117
The Servicer.................................................................119
Servicing of Housing Loans..........................................119
Collection and Enforcement Procedures...............................119
Collection and Foreclosure Process..................................120
Servicer Delinquency Experience.....................................121
Prepayment and Yield Considerations..........................................122
General ............................................................122
Prepayments.........................................................122
Weighted Average Lives..............................................123
Use of Proceeds..............................................................129
Legal Aspects of the Housing Loans...........................................129
General ............................................................129
Nature of Housing Loans as Security.................................129
Strata Title........................................................130
Urban Leasehold.....................................................130
Taking Security Over Land...........................................131
iii
TABLE OF CONTENTS
(continued)
PAGE
----
Enforcement of Registered Mortgages.................................131
Penalties and Prohibited Fees.......................................132
Bankruptcy..........................................................132
Environmental.......................................................133
Insolvency Considerations...........................................134
Tax Treatment of Interest on Australian Housing Loans...............134
Consumer Credit Legislation.........................................134
United States Federal Income Tax Matters.....................................136
Overview ...........................................................136
Interest Income on the US$ Notes....................................137
Sale of Notes.......................................................137
Market Discount.....................................................138
Premium ............................................................139
Backup Withholding..................................................139
Australian Tax Matters.......................................................140
Payments of Principal, Premiums and Interest........................140
Taxations of Financial Arrangements.................................141
Note Transfers......................................................141
Profit on Sale by Non-Resident Noteholders..........................142
Goods and Services Tax..............................................142
Fixed-Floating Rate Swaps and GST...................................143
Currency Swaps and GST..............................................144
Debt and Equity.....................................................144
Other Taxes.........................................................145
Taxation of the Trust...............................................145
Tax Reform Proposals................................................145
Enforcement of Foreign Judgments in Australia................................147
Exchange Controls and Limitations............................................148
Anti-Terrorism Restrictions.........................................148
Prohibited Transactions.............................................148
Transactions Which May Be Approved by the Reserve Bank of
Australia.........................................................148
ERISA Considerations.........................................................148
Legal Investment Considerations..............................................150
Available Information........................................................150
Ratings of the Notes.........................................................150
Plan of Distribution.........................................................151
Underwriting........................................................151
Offering Restrictions...............................................152
General Information..........................................................155
Listing ...........................................................155
Authorization.......................................................155
Litigation..........................................................155
Euroclear and Clearstream, Luxembourg...............................155
Announcement.................................................................155
Legal Matters................................................................156
Glossary ....................................................................157
iv
DISCLAIMERS WITH RESPECT TO SALES TO NON-U.S. INVESTORS
This section applies only to the offering of the US$ notes in countries
other than the United States of America. In this section, references to
Perpetual Trustees Victoria Limited are to that company only in its capacity as
trustee of the Interstar Millennium Series 2004-2G Trust, and not its personal
capacity or as trustee of any other trust. Perpetual Trustees Victoria Limited
is not responsible or liable for this prospectus in any capacity. Interstar
Securitisation Management Pty Limited is solely responsible for this prospectus.
Interstar Securitisation Management Pty Limited, as trust manager, has taken all
reasonable care to ensure that the information contained in this prospectus is
true and accurate in all material respects and that in relation to this
prospectus there are no material facts the omission of which would make
misleading any statement herein, whether fact or opinion.
Other than in the United States of America, no person has taken or will
take any action that would permit a public offer of the US$ notes in any country
or jurisdiction. The US$ notes may be offered non-publicly in other
jurisdictions. The US$ notes may not be offered or sold, directly or indirectly,
and neither this prospectus nor any form of application, advertisement or other
offering material may be issued, distributed or published in any country or
jurisdiction, unless permitted under all applicable laws and regulations. The
underwriters have represented that all offers and sales by them have been in
compliance, and will comply, with all applicable restrictions on offers and
sales of the US$ notes. You should inform yourself about and observe any of
these restrictions. For a description of further restrictions on offers and
sales of the US$ notes, see "Plan of Distribution -- Offering Restrictions".
This prospectus does not and is not intended to constitute an offer to
sell or a solicitation of any offer to buy any of the US$ notes by or on behalf
of Perpetual Trustees Victoria Limited in any jurisdiction in which the offer or
solicitation is not authorized or in which the person making the offer or
solicitation is not qualified to do so or to any person to whom it is unlawful
to make an offer or solicitation in such jurisdiction.
None of Perpetual Trustees Victoria Limited, in its personal capacity
and as issuer trustee, Perpetual Trustee Company Limited, as security trustee,
Interstar Securities (Australia) Pty Limited, as servicer, The Bank of New York,
as note trustee, principal paying agent, calculation agent and note registrar,
the underwriters, National Australia Bank Limited, as fixed-floating rate swap
provider, the currency swap provider, or PMI Mortgage Insurance Ltd, GE Capital
Mortgage Insurance Corporation (Australia) Pty Ltd, PMI Indemnity Limited or GE
Mortgage Insurance Pty Ltd as mortgage insurers accept any responsibility for
any information contained in this prospectus and none of them has separately
verified the information contained in this prospectus or makes any
representation, warranty or undertaking, express or implied, as to the accuracy
or completeness of any information contained in this prospectus or any other
information supplied in connection with the US$ notes.
Perpetual Trustees Victoria Limited, in its personal capacity and as
issuer trustee, Interstar Securitisation Management Pty Limited, as trust
manager, Interstar Securities (Australia) Pty Limited as servicer, Perpetual
Trustee Company Limited, as security trustee, The Bank of New York, as note
trustee, principal paying agent, calculation agent and note registrar, National
Australia Bank Limited, as fixed-floating rate swap provider, the currency swap
provider, PMI Mortgage Insurance Ltd, GE Capital Mortgage Insurance Corporation
(Australia) Pty Ltd or PMI Indemnity Limited or GE Mortgage Insurance Pty Ltd as
mortgage insurers and the underwriters do not recommend that any person should
purchase any of the US$ notes and do not accept any
v
responsibility or make any representation as to the tax consequences of
investing in the US$ notes.
Each person receiving this prospectus acknowledges that he or she has
not relied on the entities listed in the preceding paragraph nor on any person
affiliated with any of them in connection with his or her investigation of the
accuracy of the information in this prospectus or his or her investment
decisions; acknowledges that this prospectus and any other information supplied
in connection with the US$ notes is not intended to provide the basis of any
credit or other evaluation; acknowledges that the underwriters have expressly
not undertaken to review the financial condition or affairs of the trust or any
party named in the prospectus during the life of the US$ notes; acknowledges
that the trust manager does not hold an Australian financial services license;
acknowledges that he or she should make his or her own independent investigation
of the trust and the US$ notes; and acknowledges that he or she should seek his
or her own tax, accounting and legal advice as to the consequences of investing
in any of the US$ notes.
No person has been authorized to give any information or to make any
representations other than those contained in this prospectus in connection with
the issue or sale of the US$ notes. If such information or representation is
given or received, it must not be relied upon as having been authorized by
Perpetual Trustees Victoria Limited or the underwriters.
Neither the delivery of this prospectus nor any sale made in connection
with this prospectus shall, under any circumstances, create any implication
that:
o there has been no material change in the affairs of the trust or any
party named in this prospectus since the date of this prospectus; or
o any other information supplied in connection with the US$ notes is
correct as of any time subsequent to the date on which it is supplied
or, if different, the date indicated in the document containing the
same.
Perpetual Trustees Victoria Limited's liability to make payments of
interest and principal on the notes is limited to its right of indemnity from
the assets of the trust. All claims against Perpetual Trustees Victoria Limited
in relation to the notes may only be satisfied out of the assets of the trust
and are limited in recourse to the assets of the trust.
None of the rating agencies have been involved in the preparation of
this prospectus.
THIS DOCUMENT MAY NOT BE COMMUNICATED IN THE UNITED KINGDOM OTHER THAN
TO PERSONS AUTHORIZED UNDER THE FINANCIAL SERVICES AND MARKETS ACT 2000 OR
OTHERWISE HAVING PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS AND
QUALIFYING AS INVESTMENT PROFESSIONALS UNDER ARTICLE 19, OR PERSONS QUALIFYING
AS HIGH NET WORTH PERSONS UNDER ARTICLE 49, OF THE FINANCIAL SERVICES AND
MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2001, AS AMENDED, OR TO ANY OTHER
PERSON TO WHOM THIS DOCUMENT MAY OTHERWISE LAWFULLY BE COMMUNICATED OR CAUSED TO
BE COMMUNICATED NOR MAY ANY NOTES BE OFFERED OR SOLD IN THE UNITED KINGDOM
EXCEPT TO PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING,
MANAGING OR DISPOSING OF INVESTMENTS, AS PRINCIPAL OR AGENT, FOR THE PURPOSES OF
THEIR BUSINESS OR WHO IT IS REASONABLE TO EXPECT WILL ACQUIRE, HOLD, MANAGE OR
DISPOSE OF INVESTMENTS, AS PRINCIPAL OR AGENT, FOR THE PURPOSES OF THEIR
BUSINESS OR OTHERWISE IN CIRCUMSTANCES THAT DO NOT RESULT IN AN OFFER TO THE
PUBLIC WITHIN THE MEANING OF THE PUBLIC OFFERS OF SECURITIES REGULATIONS 1995,
AS AMENDED. THIS DOCUMENT IS NOT AVAILABLE TO OTHER CATEGORIES OF PERSONS IN THE
UNITED KINGDOM AND NO ONE FALLING OUTSIDE SUCH CATEGORIES IS
vi
ENTITLED TO RELY ON, AND MUST NOT ACT ON, ANY INFORMATION IN THIS DOCUMENT. THE
TRANSMISSION OF THIS DOCUMENT TO ANY PERSON IN THE UNITED KINGDOM OTHER THAN THE
CATEGORIES STATED ABOVE IS UNAUTHORIZED AND MAY CONTRAVENE THE FINANCIAL
SERVICES AND MARKETS ACT 2000.
vii
AUSTRALIAN DISCLAIMERS
o The notes do not represent deposits or other liabilities of Interstar
Securitisation Management Pty Limited or associates of Interstar
Securitisation Management Pty Limited.
o The holding of the notes is subject to investment risk, including
possible delays in repayment and loss of income and principal
invested.
o None of Interstar Securitisation Management Pty Limited, any associate
of Interstar Securitisation Management Pty Limited, Perpetual Trustees
Victoria Limited, Perpetual Trustee Company Limited, The Bank of New
York, as note trustee, principal paying agent, calculation agent and
note registrar, National Australia Bank Limited, as fixed-floating
rate swap provider, the currency swap provider or the underwriters in
any way stands behind the capital value or the performance of the
notes or the assets of the trust except to the limited extent provided
in the transaction documents and the swap agreements for the trust.
o None of Perpetual Trustees Victoria Limited, Interstar Securitisation
Management Pty Limited, as trust manager, Interstar Securities
(Australia) Pty Limited, as a seller and as servicer, Perpetual
Trustee Company Limited, as security trustee, The Bank of New York, as
note trustee, principal paying agent, calculation agent and note
registrar, National Australia Bank Limited, as fixed-floating rate
swap provider, the currency swap provider or any underwriter
guarantees the payment of interest or the repayment of principal due
on the notes.
o None of the obligations of Perpetual Trustees Victoria Limited, in its
capacity as trustee of the trust, are guaranteed in any way by
Interstar Securitisation Management Pty Limited or any associate of
Interstar Securitisation Management Pty Limited or by any associate of
Perpetual Trustees Victoria Limited.
viii
[This page intentionally left blank.]
ix
SUMMARY
This summary highlights selected information from this document and
does not contain all of the information that you need to consider in making your
investment decision. This summary contains an overview of some of the concepts
and other information to aid your understanding. All of the information
contained in this summary is qualified by the more detailed explanations in
other parts of this prospectus.
PARTIES TO THE TRANSACTION
TRUST.......................... Interstar Millennium Series 2004-2G Trust
ISSUER TRUSTEE................. Perpetual Trustees Victoria Limited (ABN 47 004
027 258), in its capacity as trustee of the
trust
TRUST MANAGER.................. Interstar Securitisation Management Pty Limited
(ABN 56 100 346 898), of Level 28, 367 Collins
Street, Melbourne, Victoria, 3000, telephone
(613) 9612-1111
NOTE TRUSTEE................... The Bank of New York
SECURITY TRUSTEE............... Perpetual Trustee Company Limited (ABN 42 000
001 007)
SERVICER....................... Interstar Securities (Australia) Pty Limited
(ABN 72 087 271 109)
BACKUP SERVICER................ KPMG Corporate Finance (Aust) Pty Limited (ABN
43 007 363 215)
SELLER......................... Interstar Securities (Australia) Pty Limited
PRINCIPAL PAYING AGENT......... The Bank of New York
CALCULATION AGENT.............. The Bank of New York
NOTE REGISTRAR................. The Bank of New York
RESIDUAL INCOME BENEFICIARY.... Interstar Securities (Australia) Pty Limited
JOINT-LEAD MANAGERS............ Barclays Capital Inc. and J.P. Morgan
Securities Inc.
UNDERWRITERS................... Barclays Capital Inc., J.P. Morgan Securities
Inc. and Deutsche Bank Securities Inc.
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) and GE
Mortgage Insurance Pty Ltd (ABN 61 071 466 334)
1
TITLE INSURER.................. First American Title Insurance Company of
Australia Pty Limited (ABN 64 075 279 908)
FIXED-FLOATING RATE
SWAP PROVIDER.................. National Australia Bank Limited (ABN 12 004 044
937) or any other acceptable fixed-floating
rate swap provider
CURRENCY SWAP PROVIDER......... Barclays Bank PLC
RATING AGENCIES................ Moody's and S&P
2
STRUCTURAL DIAGRAM
-------------------------------------
BORROWERS
-------------------------------------
----------------------------------
- --------------------------------------------
SECURITY TRUSTEE
SELLER A$ Housing Perpetual Trustee
Interstar Securities (Australia) Pty Limited Loan Payments Company Limited
- -------------------------------------------- ----------------------------------
------------------------------------- First ranking floating charge
over the assets of the trust
COLLECTIONS BANK
National Australia
Bank Limited ----------------------------------
- ---------------------------------- ------------------------------------- MORTGAGE INSURERS
PMI Indemnity Limited
TRUST MANAGER Equitable PMI Mortgage Insurance Ltd
Interstar Securitisation assignment of GE Capital Mortgage Insurance
Management Pty Limited holding loans Corporation (Australia) Pty Ltd
GE Mortgage Insurance Pty Ltd
- ----------------------------------
----------------------------------
-------------------------------------
Payments from Mortgage
ISSUER TRUSTEE Insurance Policies
Perpetual Trustees
Victoria Limited ----------------------------------
---------------
SERVICER -------------------------------- TITLE INSURER
Interstar Interstar Millennium First American Title
Securities Series 2004-2G Trust Insurance Company
- ---------------------- (Australia) Pty -------------------------------- of Australia Pty Limited
Limited
BACKUP --------------- Payments on the ----------------------------------
SERVICER US$ notes Payments from
KPMG Corporate Title Insurance
Finance (Aust) Policies ----------------------------------
Pty Limited
RESIDUAL INCOME
- ---------------------- -------------------------------- BENEFICIARY
CURRENCY SWAP Interstar Securities
PROVIDER (Australia) Pty Limited
Barclays Bank PLC
-------------------------------- ---------------------------------
- ----------------------------------
---------------------------------
FIXED-FLOATING PRINCIPAL PAYING AGENT
RATE SWAP PROVIDER The Bank of New York
National Australia ---------------------------------
Bank Limited
- ---------------------------------- --------------------------------- ---------------------------------
CLEARING SYSTEMS
The Depository Trust Company US$ NOTES
Euroclear
Clearstream, Luxembourg ---------------------------------
---------------------------------
---------------------------------
---------------------------------
NOTE TRUSTEE
US$ NOTE OWNERS The Bank of New York
---------------------------------- ---------------------------------
3
SUMMARY OF THE NOTES
In addition to the US$ notes, the issuer trustee may issue Redraw notes
collateralized by the same pool of housing loans as the US$ notes. The Redraw
notes, if and when issued, will not be registered under the Securities Act of
1933 and are not being offered by this prospectus. When used in this prospectus
the term "US$ notes" will mean the Class A notes, the Class AB notes and the
Class B notes and the term "US$ noteholders" when used in this prospectus will
mean the holders of any Class A notes, Class AB notes and/or Class B notes. The
term "notes" when used in this prospectus will mean the Redraw notes, the Class
A notes, the Class AB notes and the Class B notes.
- ------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS AB CLASS B
- ------------------------------------------------------------------------------------------------------------------------
Aggregate Initial US$1,000,000,000 US$49,000,000 US$17,100,000
Principal Amount:
- ------------------------------------------------------------------------------------------------------------------------
% of Total: 93.8% 4.6% 1.6%
- ------------------------------------------------------------------------------------------------------------------------
Anticipated Ratings:
Moody's Aaa Aa1 Aa3
S&P AAA AAA AA-
- ------------------------------------------------------------------------------------------------------------------------
Interest rate from the three-month LIBOR + 0.20% three-month LIBOR + 0.33% three-month LIBOR + 0.63%
closing date up to but
excluding the step-up
margin date
- ------------------------------------------------------------------------------------------------------------------------
Interest rate from and three-month LIBOR + 0.40% three-month LIBOR + 0.66% three-month LIBOR + 1.26%
including the step-up
margin date
- ------------------------------------------------------------------------------------------------------------------------
Minimum Denominations: US$100,000 and minimum US$100,000 and minimum US$100,000 and minimum
increments of US$1,000 in increments of US$1,000 in increments of US$1,000 in
excess excess excess
- ------------------------------------------------------------------------------------------------------------------------
Interest Accrual Method: actual/360 actual/360 actual/360
- ------------------------------------------------------------------------------------------------------------------------
Payment Dates: The 14th day or, if the 14th The 14th day or, if the 14th The 14th day or, if the 14th
day is not a business day, day is not a business day, day is not a business day,
then the next business day then the next business day then the next business day
of each March, June, of each March, June, of each March, June,
September and December September and December September and December
unless that day falls in the unless that day falls in the unless that day falls in the
next calendar month, in next calendar month, in next calendar month, in
which case the payment date which case the payment date which case the payment date
will be the preceding will be the preceding will be the preceding
business day. The first business day. The first business day. The first
payment date will be in June payment date will be in June payment date will be in June
2004. 2004. 2004.
- ------------------------------------------------------------------------------------------------------------------------
Clearance/Settlement: DTC/Euroclear/Clearstream, DTC/Euroclear/Clearstream, DTC/Euroclear Clearstream,
Luxembourg Luxembourg Luxembourg
- ------------------------------------------------------------------------------------------------------------------------
Initial Cut-Off Date: Close of business February 2, 2004
- ------------------------------------------------------------------------------------------------------------------------
Pricing Date: On or about March 4, 2004
- ------------------------------------------------------------------------------------------------------------------------
Closing Date: March 11, 2004
- ------------------------------------------------------------------------------------------------------------------------
Step-Up Margin Date: The payment date falling in March 2009
- ------------------------------------------------------------------------------------------------------------------------
Final Maturity Date: The payment date falling in March 2036
- ------------------------------------------------------------------------------------------------------------------------
Pre-Funding Period: For the period from the closing date to, but excluding, the
first payment date, the issuer trustee may acquire
additional housing loans by applying the money on deposit
in the prefunding account.
- ------------------------------------------------------------------------------------------------------------------------
4
STRUCTURAL OVERVIEW
The Interstar Millennium Trusts securitization program was established
pursuant to a master trust deed dated December 2, 1999 among Perpetual Trustees
Victoria Limited and Interstar Securities (Australia) Pty Limited. The master
trust deed provides the general terms and structure for securitizations under
the program. A series notice among the issuer trustee, Interstar Securities
(Australia) Pty Limited, as seller and servicer, Interstar Securitisation
Management Pty Limited, as trust manager, The Bank of New York, as note trustee
and Perpetual Trustee Company Limited, as security trustee, will set out the
specific details of the Interstar Millennium Series 2004-2G Trust and the notes,
which may vary from the terms set forth in the master trust deed. Each
securitization under the program is a separate transaction with a separate
trust. The assets of the Interstar Millennium Series 2004-2G 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 2004-2G Trust.
See "Description of the Trust".
The Interstar Millennium Series 2004-2G Trust involves the
securitization of housing loans originated by Interstar Securities (Australia)
Pty Limited in the name of Perpetual Trustees Victoria Limited, as trustee of a
number of warehouse trusts, and secured by first ranking mortgages over
residential property located in Australia. Interstar Securities (Australia) Pty
Limited, as beneficiary of the relevant warehouse trusts, will equitably assign
its beneficial interest in the housing loans to Perpetual Trustees Victoria
Limited as trustee of the trust, which will in turn issue the notes to fund the
acquisition of the housing loans.
The issuer trustee will grant a first ranking floating charge over all
assets which are subject to the trust under the security trust deed in favor of
Perpetual Trustee Company Limited, as security trustee, to secure the issuer
trustee's payment obligations to the noteholders and its other creditors. A
first ranking floating charge is a first priority security interest over a class
of assets, but does not attach to specific assets unless or until it
crystallizes, which means it becomes a fixed charge. The charge will crystallize
if, among other events, an event of default occurs under the security trust
deed. Once the floating charge crystallizes, the issuer trustee will no longer
be able to dispose of or create interests in the assets of the trust without the
consent of the security trustee. For a description of floating charges and
crystallization see "Description of the Transaction Documents -- The Security
Trust Deed -- Nature of the Charge".
Payments of interest and principal on the notes will come only from the
housing loans and other assets of the trust. The assets of the parties to the
transaction are not available to meet the payments of interest and principal on
the notes. If there are losses on the housing loans, the trust may not have
sufficient assets to repay the notes.
CREDIT ENHANCEMENTS
Payments of interest and principal on the US$ notes will be supported
by the following forms of credit enhancement.
SUBORDINATION
The Class AB and Class B notes will be subordinated to the Redraw notes
and the Class A notes in their right to receive interest payments. If the
threshold requirements are satisfied, principal payments will be allocated
rateably between the Class A notes, the Class AB notes and the Class B notes
based on their principal balances. If the threshold requirements are satisfied
prior to the third anniversary of the issue date, the Class AB notes and the
Class B notes will be entitled only to 50% of their pro rata allocation, with
the balance applied to pay principal on the Class A notes. On or after the third
anniversary of the issue date, if the threshold
5
requirements are satisfied, the Class AB notes and the Class B notes will be
entitled to 100% of their pro rata allocation. However, if the threshold
requirements are not satisfied, the Class AB notes and the Class B notes will be
subordinated to the Redraw notes and the Class A notes in their right to receive
principal payments. No Redraw notes or Class A notes will be issued unless all
of the Class AB notes and the Class B notes are issued.
The credit support provided by the Class AB notes and the Class B notes
is intended to enhance the likelihood that the Redraw notes and the Class A
notes will receive expected quarterly payments of interest and principal. The
following chart describes the initial credit support provided to the Class A
notes by the Class AB notes and the Class B notes:
INITIAL SUPPORT
CLASS CREDIT SUPPORT PERCENTAGE
----- -------------- ----------
Class A notes Class AB notes and 6.2%
Class B notes
The initial support percentage in the preceding table is the aggregate
initial principal balance of the Class AB notes and the Class B notes as a
percentage of the initial principal balance of all of the notes on the closing
date.
The Class B notes will be subordinated to the Class AB notes in their
right to receive interest payments. If the threshold requirements are satisfied,
principal payments will be allocated rateably between the Class A notes, the
Class AB notes and the Class B notes based on their principal balances. If the
threshold requirements are satisfied prior to the third anniversary of the issue
date, the Class AB notes and the Class B notes will be entitled only to 50% of
their pro rata allocation, with the balance applied to pay principal on the
Class A notes. On or after the third anniversary of the issue date, if the
threshold requirements are satisfied, the Class AB notes and the Class B notes
will be entitled to 100% of their pro rata allocation. However, if the threshold
requirements are not satisfied, the Class B notes will be subordinated to the
Class AB notes in their right to receive principal payments. No Class AB notes
will be issued unless all of the Class B notes are issued.
The credit support provided by the Class B notes to the Class AB notes
is intended to enhance the likelihood that the Class AB notes will receive
expected quarterly payments of interest and principal. The following chart
describes the initial credit support provided to the Class AB notes by the Class
B notes:
INITIAL SUPPORT
CLASS CREDIT SUPPORT PERCENTAGE
----- -------------- ----------
AB Class B notes 1.6%
The initial support percentage in the preceding table is the initial
principal balance of the Class B notes as a percentage of the initial principal
balance of all of the notes on the closing date.
In certain circumstances, the issuer trustee may issue Redraw notes.
See "-- Redraws" and "Interstar Residential Loan Program -- Special Features of
the Housing Loans -- Redraws".
If issued, Redraw notes will rank equally with the Class A notes in
their right to receive interest payments and, prior to the occurrence of an
event of default and enforcement of the charge under the security trust deed,
will rank in priority to the Class A 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 Redraw notes will rank equally with
the Class A notes in their right to receive both interest and principal
payments.
To the extent that there is a principal loss on a housing loan not
covered by a mortgage insurance policy or a title insurance policy or by the
application of excess income, the amount of such loss will be borne first by the
Class B notes before it is borne by the
6
Redraw notes, the Class A notes and the Class AB notes and then by the Class AB
notes before it is borne by the Redraw notes and Class A notes. See "Description
of the US$ Notes -- Charge Offs".
MORTGAGE INSURANCE POLICIES
Mortgage insurance policies issued by, or transferred to, PMI Indemnity
Limited, GE Capital Mortgage Insurance Corporation (Australia) Pty Ltd, PMI
Mortgage Insurance Ltd and GE Mortgage Insurance Pty Ltd will provide full
coverage for the principal balance, and interest, outstanding on each housing
loan irrespective of its LVR. The mortgage insurance policies are subject to
some exclusions from coverage and rights of termination which are described in
"The Mortgage Insurance Policies".
TITLE INSURANCE POLICIES
Some housing loans may be covered by title insurance policies issued by
First American Title Insurance Company of Australia Pty Limited. Title insurance
will provide 100% coverage for losses arising as a result of a relevant mortgage
being subject to a prior encumbrance, not being validly registered or being
invalid or unenforceable. The title insurance policies are subject to some
exclusions from coverage and rights of termination which are described in "The
Title Insurance Policies".
LIQUIDITY ENHANCEMENT
To enable the issuer trustee to make timely payments of interest on the
notes and other trust expenses payable from interest collections on the housing
loans, the trust manager is required to ensure that the trust has an amount
equal to at least one percent of the Australian dollar equivalent of the
outstanding principal amount of the notes invested in highly-rated, short-term
investments. These liquid authorized investments are available to make interest
payments on the notes and to pay primary expenses of the trust if there are not
enough interest collections from the housing loans available to make those
payments. In addition, principal collections on the housing loans will be made
available to make interest payments on the notes and to pay primary expenses of
the trust if there are not enough interest collections from the housing loans
and liquid authorized investments to make those payments. Any liquid authorized
investments and principal collections used to make interest payments on the
notes or to pay other expenses of the trust will be replenished on future
payment dates from excess income, to the extent available.
Each mortgage insurance policy includes timely payment cover for losses
as a result of a borrower under a housing loan failing to pay all or part of a
payment when due. This timely payment cover comprises at least twelve months of
missed payment installments for each housing loan.
REDRAWS
Under the terms of each variable rate housing loan, a borrower may, at
the absolute discretion of the servicer, redraw previously prepaid principal.
Provided the loan is not in arrears at the time of the request for a redraw, a
borrower may redraw an amount equal to the difference between the scheduled
principal balance of the loan and the current principal balance of the loan. The
issuer trustee will be reimbursed from principal collections on the housing
loans for any redraws it advances to borrowers. The amount that the issuer
trustee may advance to a borrower in respect of a particular housing loan from
time to time is limited to the difference between the scheduled principal
balance of the loan and the current principal balance of the loan and may only
be advanced in the circumstances described under "Interstar Residential Loan
Program -- Special Features of the Housing Loans -- Redraws".
Any redraws of previously prepaid principal will be funded first from
principal collections on the housing loans. If, on a
7
payment date, principal collections on the housing loans for the collection
period before that payment date are insufficient to fund redraws for that
collection period, then the trust manager may give the issuer trustee a
direction to, and the issuer trustee must, issue a series of Redraw notes. The
trust manager must not give this direction unless it has received written
confirmation from each rating agency that the issue of the Redraw notes would
not result in a downgrade or withdrawal of a rating of any note then
outstanding. See "Interstar Residential Loan Program -- Special Features of the
Housing Loans".
HEDGING ARRANGEMENTS
To hedge its interest rate and currency exposures, the issuer trustee
will enter into the following hedging arrangements:
o fixed-floating rate swaps to hedge the basis risk between the interest
rate on the housing loans which are subject to a fixed rate of
interest and the floating rate obligations of the trust, which
includes the issuer trustee's interest payments to the currency swap
provider under the currency swaps. If any fixed-rate housing loans are
included in or added to the housing loan pool or if a borrower
converts a floating rate loan to a fixed-rate loan, a fixed-floating
rate swap will be entered into by the issuer trustee; and
o three US$ currency swaps, one in respect of the Class A notes, one in
respect of the class AB notes and one in respect of the Class B notes,
to hedge the currency risk between, on one hand, the collections on
the housing loans and the amounts received by the issuer trustee under
any fixed-floating rate swaps, which are denominated in Australian
dollars, and, on the other hand, the obligation of the trust to pay
interest and principal on the Class A notes, the Class AB notes and
the Class B notes, which are each denominated in U.S. dollars,
together with the basis risk between, on one hand, amounts in respect
of interest calculated under the floating rate housing loans or under
any fixed-floating rate swaps by reference to the Australian bank bill
rate and, on the other hand, amounts in respect of interest calculated
under the Class A notes, the Class AB notes and the Class B notes by
reference to LIBOR.
OPTIONAL REDEMPTION
The trust manager will have the option to direct the issuer trustee to
redeem all of the notes on any payment date when the total outstanding principal
amount of the notes is equal to or less than 10% of the total initial principal
amount of the notes. If the trust manager directs the issuer trustee to redeem
the notes, the issuer trustee must so redeem the notes and the noteholders will
receive a payment equal to the outstanding principal amount of the notes plus
any outstanding interest on the notes. The trust manager will also 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 Redraw notes, the Class A notes and the Class AB
notes have been repaid in full or all notes are to be redeemed and must not
redeem the Class AB notes unless the Redraw notes and 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.
8
If the trust manager satisfies the issuer trustee and the note trustee
prior to giving notice to the noteholders that on the next payment date the
currency swap provider would be required to deduct or withhold from any payment
under a currency swap any amount on account of any taxes, duties, assessments or
governmental charges, then the issuer trustee must, when so directed by the
trust manager, in its sole discretion, redeem all of the notes at their
outstanding principal amount, together with accrued interest.
PREFUNDING
If on the closing date the total aggregate purchase price for the
housing loans is less than the amount received in Australian dollars by the
issuer trustee from the proceeds of the issue of the notes, the issuer trustee
will retain the difference between the two amounts, to the extent it is not
invested in liquid authorized investments, in the prefunding account. The
balance of the prefunding account must not at any time exceed the Australian
dollar equivalent of US$266,525,000 or 25% of the Australian dollar equivalent
of the initial outstanding principal amount of the US$ notes as of the closing
date. See "Description of the Assets of the Trust -- Acquisition of Housing
Loans after the Closing Date".
9
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 JANUARY 29, 2004
Housing Loan Pool Size..................................... A$1,050,134,438.47
Total Number of Housing Loans ............................. 5,629
Average Housing Loan Balance............................... A$186,557.90
Maximum Housing Loan Balance............................... A$1,206,008.53
Minimum Housing Loan Balance............................... A$0
Total Valuation of the Properties.......................... A$1,789,120,388.00
Maximum Remaining Term to Maturity in months .............. 356.00
Weighted Average Remaining Term to Maturity in months...... 340.24
Weighted Average Seasoning in months ...................... 5.12
Weighted Average Original Loan-to-Value Ratio ............. 70.48%
Weighted Average Current Loan-to-Value Ratio .............. 68.90%
Maximum Current Loan-to-Value Ratio ....................... 90.00%
The original loan-to-value ratio of a housing loan is calculated by
comparing the initial principal amount of the housing loan to the most recent
valuation of the property that is currently securing the housing loan. Thus, if
collateral has been released from the mortgage securing a housing loan or if the
property securing the housing loan has been revalued, the original loan-to-value
ratio may not reflect the actual loan-to-value ratio at the origination of that
housing loan. The current loan-to-value ratio of a housing loan is calculated by
comparing the current principal amount of the housing loan to the most recent
valuation of the property that is currently securing the housing loan.
Before the issuance of the notes, housing loans may be added to or
removed from the housing loan pool. New housing loans may also be substituted
for housing loans that are removed from the housing loan pool. This addition,
removal or substitution of housing loans may result in changes in the housing
loan pool characteristics shown in the preceding table and could affect the
weighted average lives and yields of the notes. The seller will not add, remove
or substitute any housing loans prior to the closing date if this would result
in a change of more than 5% in any of the characteristics of the pool of housing
loans described in the above table, unless a revised prospectus is delivered to
prospective investors.
10
WITHHOLDING TAX
Payments of principal and interest on the US$ notes will be reduced by
any applicable withholding taxes assessed on the issuer trustee or any paying
agent and could be reduced if any withholding taxes are assessed in respect of
payments under the housing loans. Neither the issuer trustee nor any paying
agent nor any borrower is obliged to pay any additional amounts to the US$
noteholders to cover any withholding taxes.
If the Commonwealth of Australia or any other applicable jurisdiction
requires the withholding of amounts:
o from payments of principal or interest to the noteholders;
o from payments by the issuer trustee to the currency swap provider
under a currency swap; or
o from payments by borrowers under the housing loans,
due to taxes, duties, assessments or other governmental charges, the issuer
trustee must, when so directed by noteholders representing at least 75% of the
outstanding principal amount of the notes and provided the issuer trustee will
be in a position to discharge all of its liabilities in respect of the notes,
redeem all of the notes. See "Description of the US$ Notes -- Redemption of the
Notes for Taxation or Other Reasons".
U.S. TAX STATUS
In the opinion of Mayer, Brown, Rowe & Maw LLP, special U.S. tax
counsel to the trust manager, the US$ notes will be characterized as debt for
U.S. federal income tax purposes. Each US$ noteholder, by acceptance of a US$
note, agrees to treat the notes as indebtedness. See "United States Federal
Income Tax Matters".
AUSTRALIAN TAX STATUS
The US$ notes should be characterized as debt for Australian tax
purposes. See "Australian Tax Matters".
LEGAL INVESTMENT
The US$ notes will not constitute "mortgage-related securities" for the
purposes of the Secondary Mortgage Market Enhancement Act of 1984. No
representation is made as to whether the notes constitute legal investments
under any applicable statute, law, rule, regulation or order for any entity
whose investment activities are subject to investment laws and regulations or to
review by regulatory authorities. You are urged to consult with your own legal
advisors concerning the status of the US$ notes as legal investments for you.
See "Legal Investment Considerations".
ERISA CONSIDERATIONS
Subject to the considerations described below in "ERISA
Considerations", the US$ notes will be eligible for purchase by certain
retirement plans subject to the Employee Retirement Income Security Act of 1974,
as amended. Investors should consult their counsel with respect to the
consequences under ERISA and the United States Internal Revenue Code of 1986, as
amended, of the plan's acquisition and ownership of the US$ notes. See "ERISA
Considerations."
BOOK-ENTRY REGISTRATION
Persons acquiring beneficial ownership interests in the US$ notes will
hold their US$ notes through The Depository Trust Company in the United States
or Clearstream, Luxembourg or Euroclear outside of the United States. Transfers
within The Depository Trust Company, Clearstream, Luxembourg or Euroclear will
be in accordance with the usual rules and operating procedures of the relevant
system.
11
Crossmarket transfers between persons holding directly or indirectly through The
Depository Trust Company, on the one hand, and persons holding directly or
indirectly through Clearstream, Luxembourg or Euroclear, on the other hand, will
take place in The Depository Trust Company through the relevant depositories of
Clearstream, Luxembourg or Euroclear.
COLLECTIONS
The issuer trustee will receive for each collection period the
following amounts, which are known as collections:
o payments of interest, principal and fees, including prepayments of
principal under the housing loans;
o proceeds from the enforcement of the housing loans and registered
mortgages relating to those housing loans;
o amounts received under any fixed-floating rate swap and the currency
swaps;
o amounts received under mortgage insurance policies and title insurance
policies;
o income in respect of authorized investments of the trust; and
o interest on amounts in the collection account.
Collections will be allocated between income and mortgage principal
repayments. Collections attributable to interest and fees are known as income.
The collections attributable to principal are known as mortgage principal
repayments.
Income is normally used to pay fees and expenses of the issuer trustee
in connection with the trust, together with interest on the notes. Mortgage
principal repayments are normally used to pay principal on the notes. However,
if there is not enough income to pay senior fees and expenses of the issuer
trustee and interest on the notes for a period, the trust manager will direct
the issuer trustee to apply liquid authorized investments then mortgage
principal repayments to pay such unpaid fees, expenses and interest. Any liquid
authorized investments and mortgage principal repayments used to make interest
payments on the notes or to pay senior fees and expenses of the issuer trustee
will be replenished on future payment dates from excess income, to the extent
available. If there is excess income after payment of senior fees and expenses
of the issuer trustee, interest on the notes and replenishment of liquid
authorized investments and mortgage principal repayments such excess income will
first reimburse any charge-offs and then any carryover charge-offs on the
housing loans. Any remaining excess income will be distributed to the residual
income beneficiary at the end of each collection period.
INTEREST ON THE NOTES
Interest on the notes will be payable quarterly in arrears on each
payment date. Amounts available to make interest payments on the notes will be
allocated to pay interest on the Redraw notes and the Class A notes before any
allocation is made to pay interest on the Class AB notes and the Class B notes.
Amounts available to make interest payments on the notes will be allocated to
pay interest on the Class AB notes before any allocation is made to pay interest
on the Class B notes. Amounts available to make interest payments on the Redraw
notes and the Class A notes will be allocated rateably between the Redraw notes
and the Class A notes based on the amount of Australian dollar interest owed, in
relation to the Redraw notes, or related swap amounts, in relation to the Class
A notes. Interest on each class of notes is calculated for each interest period
at the note's interest rate:
12
o on the outstanding principal amount of that note at the beginning of
that interest period, after giving effect to any payments of principal
with respect to that note on that day; and
o on the basis of the actual number of days in that interest period and
a year of 360 days for the US$ notes, or 365 days for the Redraw
notes.
PRINCIPAL ON THE NOTES
Principal on the notes will be payable on each payment date. On each
payment date prior to the enforcement of the charge under the security trust
deed, principal will be paid first on the Redraw notes, if any have been issued,
until the Redraw notes have been redeemed in full. If the threshold requirements
have been met, principal payments will then be allocated pro rata among the
Class A notes, the Class AB notes and the Class B notes based on their principal
balances. If the threshold requirements are satisfied prior to the third
anniversary of the issue date, the Class AB notes and the Class B notes will be
entitled only to 50% of their pro rata allocation, with the balance applied to
pay principal on the Class A notes. On or after the third anniversary of the
issue date, if the threshold requirements are satisfied, the Class AB notes and
the Class B notes will be entitled to 100% of their pro rata allocation. If the
threshold requirements have not been met, principal payments will then be paid
first pro rata among the Class A notes based on their principal balances until
such time as all the Class A notes have been redeemed in full, second pro rata
among the Class AB notes based on their principal balances until such time as
all the Class AB notes have been redeemed in full, and third pro rata among the
Class B notes based on their principal balances until such time as all the Class
B notes have been redeemed in full. If the security trust deed is enforced after
an event of default, the proceeds from the enforcement will be distributed pro
rata among all of the Redraw notes and the Class A notes prior to any
distributions to the Class AB notes or Class B notes and will be distributed pro
rata among all of the Class AB notes prior to any distributions to the Class B
notes.
ALLOCATION OF CASH FLOWS
On each payment date, the issuer trustee will repay principal and
interest to each noteholder to the extent that there are collections received
for those payments. The charts on the next two pages summarize the flow of
payments.
13
DISTRIBUTION OF INCOME
ON EACH PAYMENT DATE
-------------------------------------------------
Pay to the seller the Accrued Interest Adjustment
-------------------------------------------------
-------------
Pay any taxes
-------------
-------------------------------------------------
Pay pro rata:
o the issuer trustee's fee
o any fees payable to the note trustee
-------------------------------------------------
-------------------------------------------------
Pay pro rata:
o the fees payable pro rata to the paying agents
o any fees payable to the calculation agent
o any fees payable to the note registrar
-------------------------------------------------
---------------------------------------------------------------------
Pay the expenses of the trust - other than any fees payable to the
issuer trustee, the note trustee, the paying agents, the calculation
agent, the note registrar, the servicer and the trust manager - in
relation to the collection period
---------------------------------------------------------------------
---------------------------------------------------------------------
Pay the expenses of the trust - other than any fees payable to the
issuer trustee, the note trustee, the paying agents, the calculation
agent, the note registrar, the servicer and the trust manager - which
the trust manager or the issuer reasonably anticipates will be
incurred prior to the next payment date
---------------------------------------------------------------------
---------------------------------------------------------------------
Pay the expenses of the trust - other than any fees payable to the
issuer trustee, the note trustee, the paying agents, the calculation
agent, the note registrar, the servicer and the trust manager - not
covered above which have already been incurred prior to that payment
date but which have not by the two boxes previously been paid or
reimbursed
---------------------------------------------------------------------
-----------------------------------------------------------
Pay pro rata the trust manager's fee and the servicer's fee
-----------------------------------------------------------
Pay pro rata:
----------------------------------------------------------------------
o any amounts payable to the fixed-floating rate swap provider
under any fixed-floating rate swaps other than any break costs in
respect of the termination of the fixed-floating rate swap
o any interest for the interest period ending on that payment date
to the Redraw noteholders
o (1) the Class A A$ Interest Amount for that payment date to the
currency swap provider and the reciprocal payment by the currency
swap provider is thereafter to be applied towards payment of
interest on the Class A notes, including interest due but unpaid
from any previous payment date or (2) if the Class A currency
swap is terminated an A$ amount that the trust manager determines
in good faith to be applied on that payment date in order to
enable the issuer trustee to meet its obligations to pay interest
on the Class A notes to the note trustee for purchase of U.S.
dollars at the spot exchange rate to be applied towards payment
of interest on the Class A notes on that payment date, including
interest due but unpaid from any previous payment date
o to the currency swap provider any break costs payable under the
Class A currency swap, other than in respect of the termination
of the Class A currency swap where the currency swap provider is
the defaulting party
----------------------------------------------------------------------
----------------------------------------------------------------------
Pay pro rata :
o (1) the Class AB A$ Interest Amount for that payment date to the
currency swap provider and the reciprocal payment by the currency
swap provider is thereafter to be applied towards payments of
interest on the Class AB notes, including interest due but unpaid
from any previous payment date or (2) if the Class AB currency
swap is terminated an A$ amount that the trust manager determines
in good faith to be applied on that payment date in order to
enable the issuer trustee to meet its obligations to pay interest
on the Class AB notes to the note trustee for purchase of U.S.
dollars at the spot exchange rate to be applied towards payment
of interest on the Class AB notes on that payment date, including
interest due but unpaid from any previous payment date
o to the currency swap provider any break costs payable under the
Class AB currency swap, other than in respect of the termination
of the Class AB currency swap where the currency swap provider is
the defaulting party
----------------------------------------------------------------------
----------------------------------------------------------------------
Pay pro rata:
o (1) the Class B A$ Interest Amount for that payment date to the
currency swap provider and the reciprocal payment by the currency
swap provider is thereafter to be applied towards payments of
interest on the Class B notes, including interest due but unpaid
from any previous payment date or (2) if the Class B currency
swap is terminated an A$ amount that the trust manager determines
in good faith to be applied on that payment date in order to
enable the issuer trustee to meet its obligations to pay interest
on the Class B notes to the note trustee for purchase of U.S.
dollars at the spot exchange rate to be applied towards payment
of interest on the Class B notes on that payment date, including
interest due but unpaid from any previous payment date
o to the currency swap provider any break costs payable under the
Class B currency swap, other than in respect of the termination
of the Class B currency swap where the currency swap provider is
the defaulting party
----------------------------------------------------------------------
14
DISTRIBUTION OF INCOME ON
EACH PAYMENT DATE (CONTINUED)
--------------------------------------------------------------------
Apply as Mortgage Principal Repayments amounts previously used from
Liquid Authorized Investments and Mortgage Principal Repayments to
make up any Income Shortfalls to the extent such amount has not been
previously repaid
--------------------------------------------------------------------
--------------------------------------------------------------------
Reduce the Aggregate Principal Loss Amount in relation to the
collection period
--------------------------------------------------------------------
--------------------------------------------------------------------
Reduce the total amount of any Carryover Charge-offs
--------------------------------------------------------------------
--------------------------------------------------------------------
Pay pro rata break costs to:
o the fixed-floating rate swap provider
o the currency swap provider in respect of the termination of the
currency swaps where the currency swap provider is the
defaulting party
--------------------------------------------------------------------
--------------------------------------------------------------------
Pay fees payable to the seller
--------------------------------------------------------------------
--------------------------------------------------------------------
Pay pro rata the balance to each holder of a residual income unit
--------------------------------------------------------------------
15
DISTRIBUTION OF MORTGAGE PRINCIPAL REPAYMENTS, LIQUID
AUTHORIZED INVESTMENTS AND RECOVERY AMOUNTS ON
EACH PAYMENT DATE
- --------------------------------------------------------------------------------
Apply for liquidity purposes in replenishing liquid authorized investments
up to the prescribed minimum level, in funding redraws or funding advances
to borrowers under the housing loans which are line of credit loans
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Apply first liquid authorized investments and then mortgage principal
repayments to Available Income to make up any Income Shortfall
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Replenish liquid authorized investments until the value of liquid
authorized investments equals the prescribed minimum level
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Payments of principal on the Redraw notes
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If the Threshold Requirements are satisfied, pro rata:
o (A) to pay to (1) prior to the termination of the Class A currency swap,
the currency swap provider the Class A A$ Equivalent of the Principal
Amount of the Class A notes and the reciprocal payment by the currency swap
provider is thereafter to be applied towards payment of the Principal
Amount of the Class A notes on that payment date or (2) if the Class A
currency swap has been terminated, the note trustee for purchase of U.S.
dollars at the spot exchange rate to be applied in repaying principal on
the Class A notes on that payment date, in each case until such time as all
of the Class A notes have been redeemed in full;
o (B) to pay to (1) prior to the termination of the Class AB currency swap,
the currency swap provider the Class AB A$ Equivalent of the Principal
Amount of the Class AB notes and the reciprocal payment by the currency
swap provider is thereafter to be applied towards payment of the Principal
Amount of the Class AB notes on that payment date or (2) if the Class AB
currency swap has been terminated, the note trustee for purchase of U.S.
dollars at the spot exchange rate to be applied in repaying principal on
the Class AB notes on that payment date, in each case until such time as
all of the Class AB notes have been redeemed in full; and
o (C) to pay to (1) prior to the termination of the Class B currency swap,
the currency swap provider the Class B A$ Equivalent of the Principal
Amount of the Class B notes and the reciprocal payment by the currency swap
provider is thereafter to be applied towards payment of the Principal
Amount of the Class B notes on that payment date or (2) if the Class B
currency swap has been terminated, the note trustee for purchase of U.S.
dollars at the spot exchange rate to be applied in repaying principal on
the Class B notes on that payment date, in each case until such time as all
of the Class B notes have been redeemed in full,
provided that:
o (D) if the Threshold Requirements are satisfied on any payment date prior
to the third anniversary of the closing date, the issuer trustee will pay
on that payment date under each of sub-paragraphs (B) and (C) above 50% of
the amount that would otherwise have been payable if not for this
sub-paragraph (D), and will pay the balance of the amount otherwise so
payable in accordance with sub-paragraph (A). On or after the third
anniversary of the closing date, if the Threshold Requirements are
satisfied, the issuer trustee will pay 100% of the amount payable under
each of sub-paragraphs (B) and (C) above; and
o (E) each such amount in sub-paragraphs (B) and (C) above shall only be
distributed to the extent that such distribution will not result in a
breach of the Threshold Requirements; or
If the Threshold Requirements are not satisfied:
o first:
o to pay to (1) prior to the termination of the Class A currency swap,
the currency swap provider the Class A A$ Equivalent of the Principal
Amount of the Class A notes and the reciprocal payment by the currency
swap provider is thereafter to be applied towards payment of the
Principal Amount of the Class A notes on that payment date or (2) if
the Class A currency swap has been terminated, the note trustee for
purchase of U.S. dollars at the spot exchange rate to be applied in
repaying principal on the Class A notes on that payment date, in each
case until such time as all Class A notes have been redeemed in full;
o second:
o to pay to (1) prior to the termination of the Class AB currency swap,
the currency swap provider the Class AB A$ Equivalent of the Principal
Amount of the Class AB notes and the reciprocal payment by the
currency swap provider is thereafter to be applied towards payment of
the Principal Amount of the Class AB notes or (2) if the Class AB
currency swap has been terminated, the note trustee for the purchase
of U.S. dollars at the exchange rate to be applied in repaying
principal on the Class AB notes on that payment date, in each case
until such time as all Class AB notes have been redeemed in full; and
o third:
o to pay to (1) prior to the termination of the Class B currency swap,
the currency swap provider the Class B A$ Equivalent of the Principal
Amount of the Class B notes and the reciprocal payment by the currency
swap provider is thereafter to be applied towards payment of the
Principal Amount of the Class B notes or (2) if the Class B currency
swap has been terminated, the note trustee for purchase of U.S.
dollars at the exchange rate to be applied in repaying principal on
the Class B notes on that payment date, in each case until such time
as all Class B notes have been redeemed in full.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Payment as a distribution to the holder of the residual capital unit as to A$10,
and the remaining balance pro rata to each holder of a residual income unit.
- --------------------------------------------------------------------------------
16
RISK FACTORS
The US$ notes are complex securities issued by a foreign entity and
secured by property located in a foreign jurisdiction. You should consider the
following risk factors in deciding whether to purchase any US$ notes. There may
be other unforeseen reasons why you might not receive principal or interest on
your US$ notes. You should also read the detailed information set out elsewhere
in the prospectus.
THE NOTES WILL BE PAID o The notes are debt obligations of the
ONLY FROM THE ASSETS OF issuer trustee only in its capacity as
THE TRUST trustee of the trust. The notes do not
represent an interest in or obligation of
any of the other parties to the
transaction. The assets of the trust will
be the sole source of payments on the
notes. The issuer trustee's other assets
will only be available to make payments on
the notes if the issuer trustee is
negligent or commits fraud or a willful
default. Therefore, if the assets of the
trust are insufficient to pay the interest
and principal on your notes when due,
there will be no other source from which
to receive these payments and you may not
get back your entire investment or the
yield you expected to receive.
THERE IS NO WAY TO PREDICT o The rate of principal and interest
THE ACTUAL RATE AND TIMING OF payments on pools of housing loans varies
PAYMENTS 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, any fixed-floating
rate swap and the currency swaps will also
have a key impact on such payments in
terms of both the timeliness of such
payments and the amount of such payments.
Unexpected prepayment rates could have the
following negative effects:
17
o if you bought your notes for more
than their face amount, the yield on
your notes will drop if principal
payments occur at a faster rate than
you expect; or
o if you bought your notes for less
than their face amount, the yield on
your notes will drop if principal
payments occur at a slower rate than
you expect.
LOSSES AND DELINQUENT PAYMENTS o If borrowers fail to make payments of
ON THE HOUSING LOANS MAY AFFECT interest and principal under the housing
THE 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 ON THE HOUSING o Substantial delays could be encountered in
LOANS MAY CAUSE DELAYS IN connection with the liquidation of a
PAYMENT AND LOSSES housing loan, which may lead to shortfalls
in payments to you to the extent those
shortfalls are not covered by excess
income, a mortgage insurance policy or
title insurance policy or if the relevant
mortgage insurer or title insurer fails to
perform its obligations under the relevant
mortgage insurance policy or title
insurance policy.
o Further, enforcement expenses such as
legal fees, real estate taxes and
maintenance and preservation expenses, to
the extent not covered by a mortgage
insurance policy, a title insurance policy
or excess income, will reduce the net
amounts recoverable by the issuer trustee
from an enforced housing loan or mortgage.
If the proceeds of the sale of a mortgaged
property, net of these expenses, are less
than the amount due under the related
housing loan, the issuer trustee may not
have enough funds to make full payments of
interest and principal due to you, unless
the difference is covered under a mortgage
insurance policy or a title insurance
policy or by excess income. In addition,
even if these risks are covered by a
mortgage insurance policy or title
insurance policy there is no guarantee
that the mortgage insurer or title insurer
will promptly make any payment under any
mortgage insurance policy or title
insurance policy or that the mortgage
insurer or title insurer will have the
necessary financial capacity to make any
such payment at the relevant time.
18
CERTAIN PROVISIONS OF THE o The liability of a mortgage insurer is
MORTGAGE INSURANCE POLICIES governed by the terms of the relevant
MAY AFFECT THE RETURN ON mortgage issuance policy, which contains
YOUR NOTES certain exclusions that may allow that
mortgage insurer to reduce a claim or
terminate mortgage insurance cover in
respect of a housing loan in certain
circumstances. See "The Mortgage Insurance
Policies". Any such reduction or
termination may affect the ability of the
issuer trustee to pay you principal and
interest in full.
CERTAIN PROVISIONS OF THE o The liability of the title insurer is
TITLE INSURANCE POLICIES MAY governed by the terms of the title
AFFECT THE RETURN ON YOUR NOTES insurance policy, which contains certain
exclusions which may allow the title
insurer to reduce a claim or not provide
title insurance policy cover in respect of
a relevant mortgage relating to a housing
loan. See "The Title Insurance Policies".
Any such reduction or termination may
affect the ability of the issuer trustee
to recover all moneys secured by the
relevant mortgage and thereby affect the
ability of the issuer trustee to pay you
principal and interest in full.
THE SUBORDINATION OF THE CLASS o The amount of credit enhancement provided
B NOTES AND THE CLASS AB NOTES through the subordination of the Class B
PROVIDES ONLY LIMITED PROTECTION notes and the Class AB notes to the Redraw
AGAINST LOSSES ON THE REDRAW notes and the Class A notes is limited and
NOTES AND THE CLASS A NOTES could be depleted prior to the payment in
full of the Redraw notes and the Class A
notes. If principal losses incurred by the
trust exceed the principal amount of the
Class B notes and the Class AB notes, you
may suffer losses on your Class A notes.
THE SUBORDINATION OF THE CLASS o The amount of credit enhancement provided
B NOTES PROVIDES ONLY LIMITED through the subordination of the Class B
PROTECTION AGAINST LOSSES ON notes to the Class AB notes is limited and
THE CLASS AB NOTES could be depleted prior to the payment in
full of the Class AB notes. If principal
losses incurred by the trust exceed the
principal amount of the Class B notes, you
may suffer losses on your Class AB notes.
YOU MAY NOT BE ABLE TO RESELL o The underwriters are not required to
YOUR NOTES assist you in reselling your notes. A
secondary market for your notes may not
develop. If a secondary market does
develop, it might not continue or might
not be sufficiently liquid to allow you to
resell any of your notes readily or at the
price you desire. The market value of your
notes is likely to fluctuate, which could
result in significant losses to you.
THE TERMINATION OF ANY OF THE o The issuer trustee will exchange the
SWAPS MAY SUBJECT YOU TO LOSSES interest payments from any fixed rate
FROM INTEREST RATE OR CURRENCY housing loans for variable rate payments
FLUCTUATIONS based upon the three-month Australian bank
bill rate. If a fixed-floating rate swap
is terminated or the fixed-floating rate
swap provider
19
fails to perform its obligations, you will
be exposed to the risk that the floating
rate of interest payable with respect to
the notes will be greater than the
discretionary fixed rate set by the
servicer on the fixed rate housing loans,
which may lead to losses to you. See
"Description of the US$ Notes --
Fixed-Floating Rate Swaps" below.
o The issuer trustee will receive payments
from the borrowers on the housing loans
and the fixed-floating rate swap provider
in Australian dollars -- calculated, in
the case of payments by the fixed-floating
rate swap provider, by reference to the
Australian bank bill rate -- and make
payments to you in U.S. dollars,
calculated, in the case of payments of
interest, by reference to LIBOR. Under
each of the Class A currency swap, the
Class AB currency swap and the Class B
currency swap, the currency swap provider
will exchange Australian dollar receipts
for U.S. dollar payments, and in the case
of interest, amounts calculated by
reference to the Australian bank bill rate
for amounts calculated by reference to
LIBOR. If the currency swap provider fails
to perform its obligations or if any of
the Class A currency swap, the Class AB
currency swap or the Class B currency swap
is terminated, the issuer trustee will
have to exchange its Australian dollars
for U.S. dollars, and its Australian bank
bill rate obligations for LIBOR
obligations, at a relevant spot exchange
rate that may not provide sufficient U.S.
dollars to make payments to you in full.
PREPAYMENTS DURING A o If a prepayment is received on a housing
COLLECTION PERIOD MAY RESULT loan during a collection period, interest
IN YOU NOT RECEIVING YOUR on the housing loan will cease to accrue
FULL INTEREST 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 the full amount of interest
due on the next payment date.
THE PROCEEDS FROM THE o If the security trustee enforces the
ENFORCEMENT OF THE SECURITY security interest over the assets of the
TRUST DEED MAY BE INSUFFICIENT trust after an event of default under the
TO PAY AMOUNTS DUE TO 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
20
providers will generally be entitled to
receive the proceeds of any sale of the
assets of the trust, to the extent they
are owed fees and expenses, before you.
Consequently, the proceeds from the sale
of the assets of the trust after an event
of default under the security trust deed
may be insufficient to pay you principal
and interest in full.
IF THE TRUST MANAGER DIRECTS o If the trust manager directs the issuer
THE ISSUER TRUSTEE TO REDEEM trustee to redeem the notes early as
THE NOTES EARLY, THE YIELD ON described in "Description of the US$ Notes
YOUR NOTES MAY BE LOWER THAN -- Optional Redemption of the Notes", the
EXPECTED purchase of the housing loans will result
in the early retirement of your notes,
which will shorten their average lives
and potentially lower the yield on your
notes.
THE IMPOSITION OF A o If a withholding tax is imposed on
WITHHOLDING TAX WILL REDUCE payments by the issuer trustee or any
PAYMENTS TO YOU AND MAY LEAD TO paying agent of interest on your notes,
AN EARLY REDEMPTION 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 to discharge all of its
liabilities in respect of the notes, on
the next payment date redeem in whole, but
not in part, the aggregate outstanding
principal amount plus accrued interest on
the notes. If the option to redeem the
notes affected by a withholding tax is
exercised, you may not be able to reinvest
the redemption payments at a comparable
interest rate.
THE FEATURES OF THE HOUSING o The features of the housing loans,
LOANS MAY CHANGE, WHICH COULD including their interest rates, may be
AFFECT THE TIMING AND AMOUNT changed by the servicer, either on its own
OF PAYMENTS TO YOU initiative or at a borrower's 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 each
borrower's 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
21
prepayment than you expected, which could
affect the yield on your notes.
THERE ARE LIMITS ON THE AMOUNT o If the interest collections during a
OF 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 notes on the next
payment date, principal collections
collected during the collection period may
be used to cover these amounts. In the
event that there is not enough money
available from principal collections, you
may not receive a full payment of interest
on the relevant payment date, which will
reduce the yield on your notes.
THE USE OF LIQUID AUTHORIZED o If liquid authorized investments or
INVESTMENTS OR PRINCIPAL principal collections are drawn upon to
COLLECTIONS TO COVER LIQUIDITY cover shortfalls in interest, and there is
SHORTFALLS MAY LEAD TO insufficient excess income in succeeding
PRINCIPAL LOSSES collection periods to repay those liquid
authorized investments or principal
collections, you may not receive full
repayment of principal on your notes.
A DECLINE IN AUSTRALIAN ECONOMIC o The Australian economy has been
CONDITIONS MAY LEAD TO LOSSES experiencing a prolonged period of
OR DELAYS IN PAYMENTS ON YOUR expansion with relatively low and stable
NOTES interest rates and steadily increasing
property values. However, there were two
25 basis point increases in interest rates
in Australia in the latter half of 2003.
If the Australian economy were to
experience a downturn, an increase in
interest rates, an increase in
unemployment, a fall in property values or
any combination of these factors,
delinquencies or losses on the housing
loans may increase, which may cause losses
or delays in payments on your notes.
CONSUMER PROTECTION LAWS MAY o Some of the housing loans are regulated by
AFFECT THE TIMING OR AMOUNT OF the Consumer Credit Legislation. Under
INTEREST OR PRINCIPAL PAYMENTS that legislation, a borrower may have a
TO YOU right to apply to a court to:
o vary the terms of their housing loan
on the grounds of hardship or that it
is an unjust contract;
o reduce or cancel any interest rate
payable on the housing loan which is
unconscionable;
o have certain provisions of the
housing loan or relevant mortgage
which are in breach of the
legislation declared unenforceable;
o obtain an order for a civil penalty;
or
22
o obtain restitution or compensation,
in relation to any breaches of the
Consumer Credit Legislation in
relation to the housing loan or
relevant mortgage.
o Any such order may affect the timing or
amount of interest or principal repayments
under the relevant housing loan, which may
in turn affect the timing or amount of
interest or principal payments to you
under the notes.
o In addition, a mortgagee's ability to
enforce a mortgage which is subject to the
Consumer Credit Legislation is limited by
various demand and notice procedures which
are required to be followed. For example,
as a general rule enforcement cannot occur
unless the relevant default is not
remedied within 30 days after a default
notice is given. Borrowers may also be
entitled to initiate negotiations with the
mortgagee for a postponement of
enforcement proceedings. Any order under
the Consumer Credit Legislation may affect
the timing or amount of interest or
principal payments or repayments under the
relevant housing loan, which may in turn
affect the timing or amount of interest or
principal payments or repayments to you
under the notes.
THE CONCENTRATION OF HOUSING o The trust contains a high concentration of
LOANS IN SPECIFIC GEOGRAPHIC housing loans secured by properties
AREAS MAY INCREASE THE located within New South Wales, Victoria
POSSIBILITY OF LOSS ON YOUR and Queensland. Any deterioration in the
NOTES 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.
23
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 DISTRIBUTIONS AND The lack of physical certificates could:
HAMPER YOUR ABILITY TO PLEDGE
OR RESELL YOUR NOTES o cause you to experience delays in
receiving payments on the notes
because the principal paying agent
will be sending distributions on the
notes to DTC instead of directly to
you;
o limit or prevent you from using your
notes as collateral; and
o hinder your ability to resell the
notes or reduce the price that you
receive for them.
SINCE THE TRUST MANAGER, THE o Each of Interstar Securitisation
ISSUER TRUSTEE AND THE SERVICER Management Pty Limited, Perpetual
ARE AUSTRALIAN ENTITIES, THERE Trustees Victoria Limited and
REMAINS UNCERTAINTY AS TO THE Interstar Securities (Australia) Pty
ENFORCEABILITY OF JUDGMENTS Limited is an Australian company and
OBTAINED BY US$ NOTEHOLDERS IN has agreed to submit to the
U.S. COURT BY AUSTRALIAN COURTS jurisdiction of the New York State
and United States federal courts for
purposes of any suit, action or
proceeding arising out of the
offering of the US$ notes. Generally,
a final and conclusive judgment
obtained by noteholders in U.S.
courts would be recognized and
enforceable against the trust
manager, the issuer trustee or the
servicer, as the case may be, in the
relevant Australian court without
reexamination of the merits of the
case. However, because of the foreign
location of the trust manager, the
issuer trustee and the servicer and
their directors, officers and
employees and their respective
assets, it may be difficult to effect
service of process over these persons
or to enforce against them judgments
obtained in United States courts
based upon the civil liability
provisions of the U.S. federal
securities laws. See "Enforcement of
Foreign Judgments in Australia".
AN ISSUANCE OF REDRAW NOTES MAY o The issuer trustee may issue Redraw notes
AFFECT THE TIMING AND AMOUNT OF to fund redraws of previously prepaid
PAYMENTS MADE ON THE CLASS A, principal under the housing loans if
CLASS AB AND CLASS B NOTES principal collections on the housing loans
are not sufficient. See "Interstar
Residential Loan Program -- Special
Features of the Housing Loans -- Redraws".
The Redraw notes will be senior to the
Class A notes, the Class AB notes and the
Class B notes with respect to payments of
principal and rank equally with the Class
A notes with respect to payments of
interest before the enforcement of the
charge pursuant to the security trust deed
and rank equally with the Class A notes in
all respects thereafter. The Redraw notes
will be senior to the
24
Class AB notes and to the Class B notes
with respect to payments of interest both
before and after the enforcement of the
charge pursuant to the security trust
deed. If the proceeds of enforcement of
the charge pursuant to the security trust
deed are not sufficient to pay all
obligations of the issuer trustee under
the terms and conditions of the notes, the
risk to you of a loss on your investment
in any Class A notes, Class AB notes or
Class B notes is greater if any Redraw
notes are outstanding at that time.
THE CLASS AB NOTES ARE o Prior to the enforcement of the charge
SUBORDINATED TO THE REDRAW NOTES under the security trust deed, the Class
AND CLASS A NOTES AND THEREFORE AB notes will be subordinated to the
CLASS AB NOTEHOLDERS MAY NOT Redraw notes at all times in their right
BE PAID ALL PRINCIPAL AND to receive principal payments, will be
INTEREST ON THE CLASS AB NOTES subordinated to the Class A notes in some
circumstances in their right to receive
principal payments and will be
subordinated to the Redraw notes and the
Class A notes at all times in their right
to receive interest payments. Following
the occurrence of an event of default and
enforcement of the charge under the
security trust deed, the Class AB notes
will be fully subordinated to the Redraw
notes and the Class A notes in their right
to receive principal and interest
payments.
o Accordingly, Class AB noteholders may not
be paid principal and interest in full in
respect of the Class AB notes. Therefore
you may not receive your entire investment
or the yield you expected to receive.
THE CLASS B NOTES ARE o Prior to the enforcement of the charge
SUBORDINATED TO THE REDRAW under the security trust deed, the Class B
NOTES, THE CLASS A NOTES AND notes will be subordinated to the Redraw
THE CLASS AB NOTES AND THEREFORE notes at all times in their right to
CLASS B NOTEHOLDERS MAY NOT BE receive principal payments, will be
PAID ALL PRINCIPAL AND INTEREST subordinated to the Class A notes and the
ON THE CLASS B NOTES Class AB notes in some circumstances in
their right to receive principal payments
and will be subordinated to the Redraw
notes, the Class A notes and the Class AB
notes at all times in their right to
receive interest payments. Following the
occurrence of an event of default and
enforcement of the charge under the
security trust deed, the Class B notes
will be fully subordinated to the Redraw
notes, the Class A notes and the Class AB
notes in their right to receive principal
and interest payments.
o Accordingly, Class B noteholders may not
be paid principal and interest in full in
respect of the Class B notes. Therefore
you may not receive your entire investment
or the yield you expected to receive.
25
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
payment date, that amount will be applied
in repayment of principal to the
noteholders in the priority described in
"Description of the US$ Notes -- Principal
Distributions". Any prepayment will
shorten the average weighted life of the
notes so prepaid. The greater the
prepayment, the shorter the weighted
average life of the affected notes which
may in turn affect the yield on your US$
notes.
THE SERVICER'S RESPONSIBILITY TO o The servicer is obligated under the
MANAGE THE INTEREST RATE transaction documents to set the interest
EXPOSURE MAY AFFECT THE RATE OF rates on the housing loans at a rate to
REPAYMENTS AND THE YIELD ON YOUR ensure that at all times the issuer
INVESTMENT trustee has sufficient cash available to
pay all interest payable on the notes and
otherwise comply with its duties and
obligations under the transaction
documents. If the servicer increases the
interest rates on the housing loans,
borrowers may be unable to make their
required payments under the housing loans.
In addition, if the interest rates are
increased above market rates, borrowers
may refinance their housing loans with
other lenders to obtain lower rates. This
could cause higher rates of principal
prepayment and delinquent payments by
borrowers than you expected and affect the
yield on your notes.
TERMINATION PAYMENTS RELATING o Upon termination of a swap, a termination
TO THE CURRENCY SWAPS OR A payment will be due either from the issuer
FIXED-FLOATING RATE SWAP ARE trustee to the swap provider or vice
SUBJECT TO 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 o If the Class A currency swap, the Class AB
PAYMENT TO THE CURRENCY SWAP currency swap or the Class B currency swap
PROVIDER MAY REDUCE PAYMENTS ON terminates before its scheduled
YOUR US$ NOTES termination date, a termination payment by
either the issuer trustee or the currency
swap provider will be payable based on the
mid-market cost of a replacement currency
swap. Any termination payment could, if
the Australian Dollar/United States dollar
exchange rate has changed significantly,
be substantial. Any termination payment
owing by the issuer trustee to the
currency swap provider will be payable out
of assets of the trust. If the Class A
currency swap, the Class AB currency swap
or the Class B currency swap terminates
early under circumstances where
26
the currency swap provider is the
defaulting party, any payment due by the
issuer trustee under the relevant currency
swap will have a lower priority than
payments of interest on the notes. If the
Class A currency swap, the Class AB
currency swap or the Class B currency swap
terminates early under any other
circumstances, any payment due by the
issuer trustee under the Class A currency
swap will have an equal priority with
interest payments on the Redraw notes and
the Class A notes, any payment due by the
issuer trustee under the Class AB currency
swap will have an equal priority with
interest payments on the Class AB notes
and any payment due by the issuer trustee
under the Class B currency swap will have
an equal priority with interest payments
on the Class B notes.
THIS PROSPECTUS PROVIDES o This prospectus describes only the
INFORMATION REGARDING ONLY A characteristics of the housing loan pool
PORTION OF THE HOUSING as of January 29, 2004. While they must
LOAN POOL, AND ADDITIONAL satisfy the criteria specified in this
HOUSING LOANS ADDED TO THE prospectus, the housing loans acquired on
HOUSING LOAN POOL COULD HAVE the closing date, and any additional
DIFFERENT CHARACTERISTICS housing loans transferred to the trust
during the prefunding period, may not have
the characteristics or statistical
composition of the housing loan pool
described in this prospectus. For example,
such housing loans may be of a different
credit quality or seasoning. The trust
manager does not expect the
characteristics or statistical composition
of the housing loan pool acquired on the
closing date or the additional housing
loans acquired after the closing date to
differ materially from the characteristics
of the housing loan pool described in this
prospectus. If you purchase a note, you
must not assume that the characteristics
of the housing loan pool, including the
additional housing loans acquired after
the closing date, will be identical to the
characteristics of the housing loan pool
disclosed in this prospectus.
RATINGS OF THE US$ NOTES DO o It is a condition to the issuance of the
NOT INSURE THEIR PAYMENT AND Class A notes that they be rated Aaa by
WITHDRAWAL OF ANY RATINGS MAY Moody's and AAA by S&P, that the Class AB
AFFECT THE VALUE OF THE US$ notes be rated at least Aa1 by Moody's and
NOTES AAA by S&P and that the Class B notes be
rated at least Aa3 by Moody's and AA- by
S&P. See "Ratings of the Notes" below.
o A rating is not a recommendation to
purchase, hold or sell the US$ notes,
inasmuch as such a rating does not address
the market price or the suitability for a
particular investor of a security. The
ratings of the US$ notes address the
likelihood of the payment of principal and
interest on the US$ notes pursuant to
27
their terms. There is no assurance that a
rating will remain for any given period of
time or that a rating will not be lowered
or withdrawn entirely by a rating agency,
if in its judgment circumstances in the
future so warrant. The ratings of the US$
notes will be based primarily on the
creditworthiness of the housing loans, the
mortgage insurance polices, the title
insurance policies, the creditworthiness
of the mortgage insurers and the title
insurers, the availability of income after
payment of the trust's expenses and
interest on the notes, the
creditworthiness of the swap providers and
the subordination provided by the Class B
notes and by the Class AB notes with
respect to the Redraw notes and the Class
A notes. Any downgrade of the ratings of
the creditworthiness of the mortgage
insurers or the title insurer may result
in the downgrade of the ratings of the
notes. Any downgrade of the ratings of the
notes may affect the price at which
purchasers will pay for your notes.
FAILURE OF THE SERVICER TO o The servicer under the investment
PERFORM ITS OBLIGATIONS MAY management agreement has been appointed as
AFFECT THE TIMING OF PAYMENTS initial servicer of the housing loans.
ON YOUR NOTES Following a servicer event of default
under the investment management agreement,
the issuer trustee must immediately
terminate the investment management
agreement. Under the backup servicer
agreement, if Interstar Securities
(Australia) Pty Limited is removed as
servicer, KPMG Corporate Finance (Aust)
Pty Limited has agreed to carry out the
duties of the servicer. There is no
guarantee that a replacement servicer will
be found who would be willing to service
the housing loans on the terms of the
investment management agreement or that it
will be able to service the housing loans
with the same level of skill and
competence as the initial servicer. A
failure by the servicer to properly
perform its servicing obligations may have
an impact on the timing of funds received
by the issuer trustee in respect of the
housing loans.
28
o The servicer is responsible for the day to
day verification and processing of checks
and direct entry paperless facilities
under the terms of the NBFI Agreement.
While providing these facilities to the
borrowers of the housing loans, the
servicer may process and authorize the
issuer trustee to pay forged or
fraudulently drawn checks, fail to comply
with stop payment notices made by the
borrowers or breach other covenants,
representations and warranties or other
provisions of the NBFI Agreement which may
affect the timing of payments on your
notes. See "Description of the US$
Notes--The Check Account and Direct
Paperless Entry Facilities Agreement".
CERTAIN HOUSING LOANS MAY NOT o The servicer will make certain
HAVE THE CHARACTERISTICS AS representations and warranties to the
SET OUT IN THE REPRESENTATIONS issuer trustee, to each noteholder and to
AND WARRANTIES MADE BY THE the security trustee in relation to the
SERVICER 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 this prospectus.
SUFFERED BY YOU FOR ANY As a result, in the event that a person
MISLEADING STATEMENT OR suffers loss due to any information
OMISSION OF A MATERIAL MATTER contained in this prospectus that is
IN THIS PROSPECTUS inaccurate or misleading, or omitting a
material matter or thing, that person will
not have recourse to the assets of the
trust.
29
YOU MAY EXPERIENCE LOSSES ON o The verification requirements for Latinum
YOUR NOTES DUE TO REDUCED Low Doc Loans and Retro Low Doc Loans,
VERIFICATION REQUIREMENTS both known as the Low Doc Loans, are less
FOR LOW DOC LOANS exhaustive than the verification
requirements for housing loans originated
through Interstar Securities (Australia)
Pty Limited's standard approval and
underwriting process. With respect to
housing loans originated under Interstar
Securities (Australia) Pty Limited's
standard approval and underwriting
process, verification of the borrower's
income is obtained through tax returns,
employer confirmation letters, credit
checks and a full and detailed current
assets and liabilities statement. However,
the only income verification made in
relation to a Latinum Low Doc Loan is to
confirm that the borrower's asset and
liability statement supports the income
disclosed by the borrower in his or her
loan application. There is no income
verification made in relation to a Retro
Low Doc Loan. The reduced verification
procedure for a Low Doc Loan will make it
more difficult to assess the credit
quality of a borrower and, in particular,
the ability of that borrower to make
timely payments of principal and interest
under a Low Doc Loan. If a borrower fails
to make such payments or fails to make
such payments on a timely basis, the
issuer trustee may not have enough funds
to make full payments of interest and
principal due on your notes.
30
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
157.
U.S. DOLLAR PRESENTATION
In this prospectus, references to "U.S. dollars", "United States
dollars" and "US$" are references to U.S. currency and references to "Australian
dollars" and "A$" are references to Australian currency. Unless otherwise stated
in this prospectus, any translations of Australian dollars into U.S. dollars
have been made at a rate of US$0.7713 = A$1.0000, the exchange rate as displayed
on the Bloomberg Service under AUD currency HP on February 20, 2004. 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.
31
THE ISSUER TRUSTEE, THE TRUST MANAGER AND THE SERVICER
THE ISSUER TRUSTEE
The issuer trustee was incorporated on October 21, 1884 as The
Australian Executors and Trustees Association Limited under the Companies
Statute 1864 of Victoria as a public company. The name was changed to Perpetual
Trustees Victoria Limited on June 30, 1989 and it now operates as a limited
liability company under the Corporations Act 2001 of Australia. The Australian
Business Number of Perpetual Trustees Victoria Limited is 47 004 027 258 and its
registered office is Level 28, 360 Collins Street, Melbourne, Victoria,
Australia.
Perpetual Trustees Victoria Limited has 4,500,000 shares on issue with
a paid amount of A$0.50 each and an amount due and payable of A$0.50 each. The
shares are held by Perpetual Trustees Australia Limited.
The principal activities of Perpetual Trustees Victoria Limited are the
provision of trustee and other commercial services. Perpetual Trustees Victoria
Limited is an authorized trustee corporation.
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$95 billion under
administration.
DIRECTORS
The directors of the issuer trustee are as follows:
NAME BUSINESS ADDRESS PRINCIPAL ACTIVITIES
- ---- ---------------- --------------------
Phillip Vernon ........... Level 8, 9 Castlereagh Street, Director
Sydney, NSW, Australia
David Bryant.............. Level 28, 360 Collins Street, Director
Melbourne, VIC, Australia
Jane Couchman............. 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 Challenger
Financial Services Group Limited.
32
DIRECTORS
The directors of Interstar Securitisation Management Pty Limited are
Vernon Spencer and Sam Kyriacou. Please refer to their descriptions below.
THE SERVICER
Interstar Securities (Australia) Pty Limited was incorporated on April
29, 1999, and continues to exist and operate as a limited liability company
under the Corporations Act 2001 of Australia. The registered office of Interstar
Securities (Australia) Pty Limited is Level 28, 367 Collins Street, Melbourne,
Australia and the telephone and facsimile numbers for its registered office are
(613) 9612 1111 and (613) 9621 2368 respectively.
Interstar Securities (Australia) Pty Limited has 1 share on issue with
a paid amount of A$1.00. The share is ultimately held by Challenger Financial
Services Group Limited.
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.
Interstar Securities (Australia) Pty Limited is an investment
management firm which specializes in the structuring and ongoing management of
residential mortgage loan portfolios and mortgage-backed securities.
The operations of Interstar Securities (Australia) Pty Limited are
directed by an experienced senior management team, comprising full-time
directors and divisional heads of loan origination, loan processing and
compliance, customer service, investment and credit management and information
technology. This team is supported by 170 administrative, marketing, and
technical staff.
Since December 1989 and prior to this issue, Interstar Securities Pty
Limited and Interstar Securities (Australia) Pty Limited have issued
approximately A$14 billion of rated mortgage-backed securities.
As at December 31, 2003 Interstar Securities (Australia) Pty Limited
managed a housing loan portfolio of approximately A$12.5 billion.
The trust manager is a wholly owned direct subsidiary of the servicer.
The servicer is a wholly owned direct subsidiary of Interstar Securities
Holdings Pty Limited (INTERSTAR HOLDINGS). All shares in Interstar Holdings are
ultimately owned by Challenger Financial Services Group Limited.
DIRECTORS
The directors of Interstar Securities (Australia) Pty Limited are as
follows:
o VERNON SPENCER has been Chairman, Founder 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
33
Australia, a Fellow of the Mortgage Industry Association of Australia,
and a former Member of The Stock Exchange of Melbourne Limited. 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 32 years.
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, wholesale funding
programs and the strategic direction of the Interstar Securities
Group.
o BASIL CARIDAKIS has been a Director of Interstar Securities
(Australia) Pty Limited since its inception and is responsible for
retail loan origination and marketing. He has been involved with
mortgage lending and financial services for the past 25 years and is
an Associate of the Mortgage Industry Association of Australia. He has
been responsible for marketing and origination of mortgage loan
products, liaison with loan originators and retailers and direct
contact with borrowers for Interstar Securities Pty Limited since 1992
and for Interstar Securities (Australia) Pty Limited since its
inception.
o ANDREW MOBILIA has been a Director of Interstar Securities (Australia)
Pty Limited since its inception and is responsible for lending and
loan administration. He has been involved with all aspects of secured
lending, administration and credit control for the past 25 years and
is an Associate of the Mortgage Industry Association of Australia. He
has been responsible for all aspects of managed asset compliance, loan
review and underwriting and arrears management for Interstar
Securities Pty Limited since 1992 and for Interstar Securities
(Australia) Pty Limited since its inception.
o BRUCE BAKER has been a Director of Interstar Securities (Australia)
Pty Limited since January 2001 and is responsible for all business
development activities. He has been involved with lending and mortgage
insurance for the past 21 years and is an Associate of the Mortgage
Industry Association of Australia. He has been National Underwriting
and Business Development manager of Interstar Securities Pty Ltd since
1994 and for Interstar Securities (Australia) Pty Limited since its
inception.
o BRIAN BENARI is the General Manager of investments for Challenger
Financial Services Group and is responsible for the Group's
investments. He is a Chartered Accountant, having trained with
Andersens and subsequently working in investment banking for JPMorgan,
Bankers Trust, Macquarie Bank and ZCM. He has over 11 years experience
in investment banking, across a range of retail and institutional
vanilla and structured products in markets including equities, debt,
foreign exchange, commodity and alternative assets.
34
o CHRIS CUFFE is the Chief Executive Officer of Challenger. He entered
the funds management industry in 1985, following a 5 year period with
chartered accountants Peat Marwick Mitchell & Co., now KPMG. In 1988
he joined the newly-formed investment arm of State Bank New South
Wales, First State Fund Managers -- now known as Colonial First State
Investments -- and in 1990 assumed the position of Chief Executive
Officer. He left Colonial First State Investments in early 2003.
He holds a Bachelor of Commerce in Accounting, Finance and Systems
from the University of New South Wales as well as a Diploma from the
Securities Institute of Australia. He is also a Fellow of the
Institute of Chartered Accountants in Australia, an Associate of the
Securities Institute of Australia and a Fellow of the Australian
Institute of Company Directors.
Interstar Securities (Australia) Pty Limited is currently ranked as a
"Strong" residential loan servicer in Australia by S&P, and has been approved by
S&P as a "Global Select Servicer" for structured finance transactions.
THE SELLER
INTERSTAR SECURITIES (AUSTRALIA) PTY LIMITED
Interstar Securities (Australia) Pty Limited is the residual income
unitholder of the Interstar Millennium Warehouse B Trust, the Interstar
Millennium Warehouse J Trust, the Interstar Millennium Warehouse M Trust, the
Interstar Millennium Warehouse N Trust, the Interstar Millennium Warehouse R
Trust and the Interstar Millennium Warehouse S Trust, each of which is a trust
within the Interstar Millennium Trusts securitisation program. Perpetual
Trustees Victoria Limited is the trustee of each of these trusts. In each of
these capacities, Perpetual Trustees Victoria Limited borrows money from
Macquarie Bank Limited, National Australia Bank Limited or Barclays Bank PLC,
JPMorgan Chase Bank and The Royal Bank of Scotland plc, Australia Branch, as the
case may be, to enable it to fund the acquisition of housing loans.
THE BACKUP SERVICER
KPMG CORPORATE FINANCE (AUST) PTY LIMITED
KPMG Corporate Finance (Aust) Pty Limited is part of a global network
of professional advisory firms that have offices in 750 cities in 152 countries.
Its services include assurance, financial advisory services, tax and legal. KPMG
Corporate Finance (Aust) Pty Limited is contracted to be the backup servicer for
Interstar Securities (Australia) Pty Limited.
35
DESCRIPTION OF THE TRUST
INTERSTAR MILLENNIUM TRUSTS 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
2004-2G Trust is a separate and distinct trust from any other trust established
under the master trust deed. The assets of the Interstar Millennium Series
2004-2G 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 2004-2G Trust.
INTERSTAR MILLENNIUM SERIES 2004-2G TRUST
The detailed terms of the Interstar Millennium Series 2004-2G 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 executed a notice of creation of trust on 31 December 2003.
The series notice, which supplements the general framework under the
master trust deed with respect to the trust, does, among other things, the
following:
o specifies the details of the notes;
o establishes the cash flow allocation;
o sets out the various representations and undertakings of the parties
specific to the housing loans, which supplement those in the master
trust deed; and
o amends the master trust deed to the extent necessary to give effect to
the specific aspects of the trust and the issue of the notes.
36
DESCRIPTION OF THE ASSETS OF THE TRUST
ASSETS OF THE TRUST
The assets of the trust will include the following:
o the pool of housing loans, including all of the issuer trustee's
interest in and title to:
o principal payments paid or payable on the housing loans at any
time from and after the applicable cut-off date; and
o interest payments paid or payable on the housing loans after the
closing date;
o rights under the:
o mortgage insurance policies issued by, or transferred to, PMI
Indemnity Limited, GE Capital Mortgage Insurance Corporation
(Australia) Pty Ltd, PMI Mortgage Insurance Ltd and GE Mortgage
Insurance Pty Ltd;
o the title insurance policies; and
o the individual property insurance policies covering the mortgaged
properties relating to the housing loans;
o amounts on deposit in the accounts established in connection with the
creation of the trust and the issuance of the notes, including the
collection account, and any instruments in which these amounts are
invested; and
o the issuer trustee's rights under the transaction documents, and its
rights under any fixed-floating rate swap and the currency swaps.
THE HOUSING LOANS
The housing loans are secured by registered first ranking mortgages on
properties located in Australia. The housing loans have been originated in the
name of Perpetual Trustees Victoria Limited directly by Interstar Securities
(Australia) Pty Limited through an Australia-wide network of mortgage brokers,
accounting firms, legal firms, financial and investment advisors and other
sources referred to Interstar Securities (Australia) Pty Limited in the ordinary
course of its business under the Interstar Millennium Trusts securitisation
program. On the closing date, Perpetual Trustees Victoria Limited will cease to
hold the pool of housing loans for the various warehouse trusts and will instead
hold them for the trust. Each housing loan was funded by Perpetual Trustees
Victoria Limited in its capacity as trustee of a warehouse trust of which the
seller is the beneficiary, and so Perpetual Trustees Victoria Limited is the
legal owner of all relevant housing loans. Each housing loan will be one of the
types of products described in "Interstar Residential Loan Program -- General
Features of the Housing Loans". The housing loans bear either a fixed rate of
interest or a variable rate of interest, or a combination of both. Each housing
loan is secured by a registered first ranking mortgage over the related
mortgaged property. The mortgaged properties consist of owner-occupied
properties and non-owner occupied properties, but do not include mobile homes
which are not permanently affixed to the ground, commercial properties or
unimproved land.
37
ACQUISITION OF HOUSING LOANS AFTER THE CLOSING DATE
THE PRE-FUNDING PERIOD
If on the closing date the total aggregate purchase price for the
housing loans is less than the amount received in Australian dollars by the
issuer trustee from the proceeds of the issue of the notes, the issuer trustee
will retain the difference between the two amounts, to the extent it is not
invested in Liquid Authorized Investments, in an account designated as the
PREFUNDING ACCOUNT. Before amounts on deposit in the Prefunding Account are
invested in acquiring or originating additional housing loans as described below
they will be invested in Liquid Authorized Investments. The balance of the
Prefunding Account must not at any time exceed 25% of the sum of the Class A A$
Equivalent of US$1,000,000,000, the Class AB A$ Equivalent of US$49,000,000 and
the Class B A$ Equivalent of US$17,100,000, or 25% of the sum of the Class A A$
Equivalent of the initial outstanding Principal Amount of the Class A notes, the
Class AB A$ Equivalent of the initial outstanding Principal Amount of the Class
AB notes and the Class B A$ Equivalent of the initial outstanding Principal
Amount of the Class B notes. At any time during the period up to but excluding
the first payment date after the closing date the issuer trustee will apply the
money on deposit in the Prefunding Account to:
o acquire additional housing loans from the seller; or
o originate additional housing loans in the ordinary course of Interstar
Securities (Australia) Pty Limited's business, provided that any
additional housing loan acquired or originated must:
o comply with the eligibility criteria; and
o not result in a downgrade or withdrawal of the rating of any
notes by any rating agency.
On the first payment date after the closing date, the balance of the
Prefunding Account that has not been used to acquire or originate additional
housing loans as described above will be applied as Mortgage Principal
Repayments as described in the section headed "Description of the US$ Notes --
Principal Distributions".
TRANSFER AND ASSIGNMENT OF THE HOUSING LOANS
On the closing date, the housing loans purchased by the trust will be
specified in the sale notice from the seller, in its capacity as seller of the
housing loans, to the issuer trustee.
The seller will equitably assign its beneficial interest in the housing
loans, the mortgages securing those housing loans and the mortgage insurance
policies, title insurance policies and insurance policies on the mortgaged
properties relating to those housing loans to the issuer trustee pursuant to the
sale notice. Both before and after the assignment, Perpetual Trustees Victoria
Limited will hold legal title to the housing loans and the ancillary rights
specified in the sale notice. Before the assignment, Perpetual Trustees Victoria
Limited will hold each of the housing loans and ancillary rights in its capacity
as trustee of a warehouse trust. After the assignment, it will hold the housing
loans and ancillary rights in its capacity as trustee of the Interstar
Millennium Series 2004-2G Trust.
38
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 or GE Mortgage Insurance Pty Ltd for its scheduled term;
o the officers of the servicer who have responsibility for the
transactions contemplated by the transaction documents do not have
actual notice that any mortgage insurer under any mortgage insurance
policy or any title insurer under any title insurance policy in
relation to a housing loan is insolvent or will be unable to pay a
valid claim;
o there has been no fraud, dishonesty, material misrepresentation or
negligence on the part of the servicer in connection with the
selection and offer to the issuer trustee of any of the housing loans;
o as at the applicable cut-off date, none of the housing loans were
satisfied, cancelled, discharged or rescinded and the mortgaged
property relating to each housing loan had not been released from the
relevant mortgage;
o the housing loans are assignable and all consents required in relation
to the assignment of the housing loans and ancillary rights have been
obtained;
o between the applicable cut-off date and the closing date the servicer
dealt with the housing loans in the ordinary course of its business;
o as of the applicable cut-off date, each housing loan satisfies the
following eligibility criteria:
o it is denominated and payable only in Australian dollars in
Australia;
o the interest rate applicable to the housing loan is either:
o a variable rate based upon any determinant as may be
considered appropriate by the servicer in its absolute
discretion;
o a fixed rate provided that:
39
o the fixed rate does not apply for a continuous period
exceeding five years from:
o the settlement date of the housing loan, where the
housing loan bears a fixed rate of interest from
the date it is settled; or
o the date on which the housing loan starts to bear
a fixed rate of interest, where that housing loan
either:
o bears a floating rate of interest and is
converting to a fixed rate of interest; or
o bears a fixed rate of interest which is
scheduled to convert to a floating rate of
interest but -- with the approval of the
relevant mortgage insurer -- the borrower
elects to pay a new fixed rate of interest;
and
o the fixed rate cash flows are swapped to a
floating rate pursuant to a fixed-floating rate
swap and the floating rate payable by the
fixed-floating rate swap provider is set on the
same dates as the interest rate is set on the
notes; or
o a combination of the variable rate and the fixed
rate described above;
o all security documents have been:
o prepared by law firms or title insurers appointed by and
acting for the seller and the servicer or, where housing
loans are originated in the name of the issuer trustee,
acting for the issuer trustee and the servicer; and
o prepared in accordance with applicable Consumer Credit
Legislation;
o with respect to housing loans acquired by the issuer trustee and
included in the housing loan pool:
o at least 90% of the aggregate mortgaged property of all
housing loans held by the issuer trustee will be located in
metropolitan areas of the capital cities and major regional
centers of Australia; and
o not more than 15% of the aggregate amount outstanding under
the housing loans will comprise individual housing loans
each with an amount outstanding exceeding A$500,000 and
secured by a mortgage over a single property;
o the seller is the beneficial owner of the housing loan and
mortgage at the time of the equitable assignment;
o the issuer trustee will be the beneficial owner of the housing
loan and mortgage after that assignment, free of any
encumbrances;
o the housing loan and mortgage are valid and enforceable;
40
o all applicable stamp duties have been paid on the mortgage
securing the housing loan;
o the housing loan and mortgage securing the housing loan will form
part of the assets of the trust;
o the whole of the right, title and interest of the mortgagee under
the mortgage securing the housing loan will be acquired by the
issuer trustee;
o the housing loan has been serviced and managed in accordance with
the requirements of the servicer's policy and procedures manual;
o the mortgage insurance policy and any title insurance policy in
relation to the housing loan and the mortgage securing the
housing loan does not restrict the assignment to the issuer
trustee;
o the housing loan is not in arrears over 30 days at the applicable
cut-off date;
o the housing loan is subject to monthly, fortnightly or weekly
payments which fully amortize the housing loan over its term;
o the loan agreement and the mortgage securing the housing loan
comply in all material respects with all applicable laws,
including any Consumer Credit Legislation;
o the loan agreement and the mortgage securing the housing loan are
assignable by the seller in equity without prior consent being
required from, or notice of the assignment needing to be given
to, the mortgagor, the borrower or any other person;
o the loan agreement and the mortgage securing the housing loan
have been duly authorized and are in full force and effect and
constitute legal, valid and binding obligations of the relevant
borrower and mortgagor enforceable against that borrower and
mortgagor in accordance with their terms and are not subject to
any dispute, offset or counterclaim;
o the housing loan is covered by a valid, binding and enforceable
mortgage insurance policy;
o the housing loan has a borrower -- and where the servicer so
requires, a guarantor -- that is a natural person or a
corporation;
o the housing loan was approved and originated by the servicer in
the ordinary course of its business;
o the borrower is required to repay the housing loan by no later
than March 2034;
o the housing loan does not require, nor does the relevant loan
agreement require, the issuer trustee to provide any redraws or
other advances once the initial funding has been provided under
the relevant loan agreement;
41
o the housing loan is secured by a mortgage that constitutes a
first ranking mortgage over freehold land or Crown leasehold land
in Australia which is or will be registered under the relevant
law relating to the registration, priority or effectiveness of
any mortgage over land in an Australian jurisdiction and
satisfies the following criteria:
o in the case of a housing loan other than a Low Doc Loan, the
amount secured or to be secured by the mortgage does not
exceed A$1,500,000;
o in the case of a Latinum Low Doc Loan, the amount secured or
to be secured by the mortgage does not exceed A$800,000;
o in the case of a Retro Low Doc Loan, the amount secured or
to be secured by the mortgage does not exceed:
o where the mortgaged property is property within the
metropolitan areas of Australia other than Tasmania,
the Northern Territory, South Australia, Western
Australia and the Australian Capital Territory --
A$800,000; or
o where the mortgaged property is property within the
metropolitan areas of Tasmania, the Northern Territory,
South Australia, Western Australia and the Australian
Capital Territory or within the regional centers of
Australia -- A$500,000;
o in respect of a mortgage:
o to secure a housing loan, other than a Low Doc Loan,
for a principal amount:
o not exceeding A$500,000-- the loan-to-value ratio
in respect of that housing loan does not exceed
90%; and
o exceeding A$500,000 but not exceeding A$1,000,000
-- the mortgaged property must constitute a single
property within the metropolitan areas of Sydney,
Melbourne, Brisbane, Adelaide or Perth and the
loan-to-value ratio in respect of that housing
loan does not exceed 80%; and
o exceeding A$1,000,000 but not exceeding
A$1,250,000 -- the mortgaged property must
constitute a single property within the
metropolitan areas of Melbourne or Sydney and the
loan-to-value ratio in respect of that housing
loan does not exceed 75%; and
o exceeding A$1,250,000 -- the mortgaged property
must constitute a single property within the
metropolitan areas of Melbourne or Sydney and the
loan-to-value ratio in respect of that housing
loan does not exceed 65%;
o to secure a Latinum Low Doc Loan for a principal amount
of:
o not exceeding A$800,000 -- the mortgaged property
must constitute a property within the metropolitan
areas or regional centers of Sydney, Melbourne or
Brisbane and the loan-to-value ratio in respect of
that housing loan does not exceed 80%;
42
o not exceeding A$600,000 -- the mortgaged property
must constitute a property within the metropolitan
areas or regional centers of Tasmania, the
Northern Territory, South Australia, Western
Australia and the Australian Capital Territory and
the loan-to-value ratio in respect of that housing
loan does not exceed 80%;
o to secure a Retro Low Doc Loan, the loan-to-value ratio
in respect of that housing loan does not exceed 65%;
o the housing loan is secured by a mortgage over a property which
has erected on it a residential dwelling which dwelling is
covered by fire and general insurance and the insurance policy in
respect of such cover must be endorsed with the name of the
issuer trustee as mortgagee; and
o the mortgaged property is valued by a valuer approved by the
servicer.
The issuer trustee has not investigated or made any inquiries regarding
the accuracy of these representations and warranties and has no obligation to do
so. The issuer trustee is entitled to rely entirely upon the representations and
warranties being correct, unless an officer involved in the administration of
the trust has actual notice to the contrary. See "Interstar Residential Loan
Program -- Approval and Underwriting Process" for a description of Low Doc
Loans, Latinum Low Doc Loans and Retro Low Doc Loans.
BREACH OF REPRESENTATIONS AND WARRANTIES
If the seller, the servicer or the issuer trustee becomes aware that a
representation or warranty relating to any housing loan or mortgage is
incorrect, it must notify the other parties and the rating agencies within 10
business days of becoming aware. If the breach is not waived or remedied to the
satisfaction of the issuer trustee within five business days of the notice or
such longer time as the issuer trustee permits then, without any action being
required by either party, the seller shall be obligated to repurchase the
affected housing loan for an amount equal to its Unpaid Balance. There can be no
assurance that the seller will have sufficient funds to repurchase such housing
loans in such event.
Upon payment of the Unpaid Balance, Perpetual Trustees Victoria Limited
will continue to hold a legal interest in the affected housing loan and mortgage
and the seller shall hold the beneficial interest in such housing loan and
mortgage and be entitled to all interest and fees that are paid in respect of
them from, and including, the date of repurchase.
OTHER FEATURES OF THE HOUSING LOANS
The housing loans have the following features:
o interest is calculated daily and charged monthly in arrears;
o payments can be on a monthly, bi-weekly or weekly basis. All
payments from borrowers are made by electronic funds transfer
directly from each borrower's bank account to a trust drawings
account at National Australia Bank Limited; and
43
o they are governed by the laws of the Commonwealth of Australia
and one of the following Australian States or Territories:
o New South Wales;
o Victoria;
o Western Australia;
o Queensland;
o South Australia;
o Northern Territory; or
o the Australian Capital Territory.
DETAILS OF THE HOUSING LOAN POOL
The information in the following tables set out statistical information
relating to the housing loans to be sold to the trust as of the close of
business on January 29, 2004. All amounts have been rounded to the nearest
Australian dollar. The sum in any column may not equal the total indicated due
to rounding.
Note that these details may not reflect the housing loan pool as of the
closing date because the seller may substitute loans proposed for sale with
other eligible housing loans or add additional eligible housing loans. The
seller may do this if, for example, the loans originally selected are repaid
early.
The seller will not add, remove or substitute any housing loans prior
to the closing date if this would result in a change of more than 5% in any of
the characteristics of the pool of housing loans described in the first table on
page 45, unless a revised prospectus is delivered to prospective investors.
44
HOUSING LOAN INFORMATION
ANALYSIS OF THE HOUSING LOAN POOL
Total pool size............................................... $1,050,134,438
Total number of loans......................................... 5,629
Average loan size............................................. $186,557.90
Maximum loan size............................................. $1,206,008.53
Total property value (current)................................ $1,789,120,388
Weighted Average current LVR.................................. 68.90%
Weighted Average original LVR................................. 70.48%
% of pool with loans [GREATER THAN] 80% LVR................... 31.64%
Weighted Average Term to Maturity (months).................... 340.24
Weighted Average Seasoning (months)........................... 5.12
Weighted Average Borrower Rate 7.05
Maximum Remaining Term to Maturity (months)................... 356
% of pool with loans [GREATER THAN] $300,000 (by number)...... 17.61%
% of pool with loans [GREATER THAN] $300,000 (by loan amount). 39.16%
% of pool in arrears (by loan amount):
1-30 days..................................................... 1.79%
31-60 days.................................................... 0.00%
61+ days...................................................... 0.00%
Total...................................................... 1.79%
HOUSING LOANS BY OCCUPANCY
NUMBER % OF DOLLAR % OF AVERAGE WGT AVG
OF TOTAL NO. AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
Owner Occupied - House........ 3,302 58.66% 560,861,644 53.41% 169,855 66.14%
Owner Occupied - Unit......... 330 5.86% 51,695,728 4.92% 156,654 68.93%
Investment - House............ 1,329 23.61% 289,936,603 27.61% 218,161 71.50%
Investment - Unit............. 668 11.87% 147,640,464 14.06% 221,019 74.26%
----- ------ ------------- ------ ------- -----
Total....................... 5,629 100.00% 1,050,134,438 100.00% 186,558 68.90%
===== ====== ============= ====== ======= =====
45
HOUSING LOANS BY LVR (LOAN-TO-VALUE RATIO)
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
<=20%......................... 478 8.49% 15,219,146 1.45% 31,839 13.71%
>20% and =<25%................ 97 1.72% 7,850,572 0.75% 80,934 22.42%
>25% and =<30%................ 124 2.20% 12,077,478 1.15% 97,399 27.37%
>30% and =<35%................ 171 3.04% 18,855,479 1.80% 110,266 32.60%
>35% and =<40%................ 168 2.98% 23,062,881 2.20% 137,279 37.54%
>40% and =<45%................ 232 4.12% 30,427,261 2.90% 131,152 42.68%
>45% and =<50%................ 240 4.26% 42,519,165 4.05% 177,163 47.46%
>50% and =<55%................ 259 4.60% 42,119,553 4.01% 162,624 51.89%
>55% and =<60%................ 310 5.51% 56,237,811 5.36% 181,412 57.52%
>60% and =<65%................ 405 7.19% 84,117,194 8.01% 207,697 62.47%
>65% and =<70%................ 418 7.43% 88,782,683 8.45% 212,399 67.63%
>70% and =<75%................ 483 8.58% 105,122,315 10.01% 217,645 72.31%
>75% and =<80%................ 815 14.48% 191,465,615 18.23% 234,927 77.72%
>80% and =<85%................ 859 15.27% 204,801,000 19.50% 238,418 80.53%
>85% and =<90%................ 570 10.13% 127,476,285 12.13% 223,643 87.78%
>90% and =<95%................ 0 0.00% 0 0.00% 0 0.00%
>95%.......................... 0 0.00% 0 0.00% 0 0.00%
----- ------ ------------- ------ ------- -----
Total....................... 5,629 100.00% 1,050,134,438 100.00% 186,558 68.90%
===== ====== ============= ====== ======= =====
HOUSING LOANS BY PRODUCT TYPES
NUMBER % OF DOLLAR % OF AVERAGE WGT AVG
OF TOTAL NO. AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
Variable - Principal & Interest 2,847 50.58% 513,704,132 48.92% 180,437 69.18%
Variable - Interest Only...... 2,345 41.66% 504,900,053 48.08% 215,309 69.39%
Variable - Line of Credit..... 437 7.76% 31,530,253 3.00% 72,152 56.61%
Fixed......................... 0 0.00% 0 0.00% 0 0.00%
----- ------ ------------- ------ ------- -----
Total....................... 5,629 100.00% 1,050,134,438 100.00% 186,558 68.90%
===== ====== ============= ====== ======= =====
46
HOUSING LOANS BY GEOGRAPHICAL DISTRIBUTION
NUMBER % OF DOLLAR % OF AVERAGE WGT AVG
OF TOTAL NO. AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
NSW (Metro)................... 1,763 31.31% 411,907,759 39.23% 233,640 68.61%
NSW (Regional)................ 298 5.29% 56,515,313 5.38% 189,649 67.16%
NSW (Country)................. 197 3.50% 33,601,853 3.20% 170,568 68.86%
ACT (Metro)................... 72 1.28% 11,894,424 1.13% 165,200 70.42%
ACT (Regional)................ 0 0.00% 0 0.00% 0 0.00%
ACT (Country)................. 0 0.00% 0 0.00% 0 0.00%
VIC (Metro)................... 1,089 19.34% 204,814,732 19.50% 188,076 68.87%
VIC (Regional)................ 37 0.66% 4,301,039 0.41% 116,244 68.32%
VIC (Country)................. 108 1.92% 16,369,439 1.56% 151,569 69.94%
QLD (Metro)................... 503 8.94% 91,269,979 8.69% 181,451 71.01%
QLD (Regional)................ 377 6.70% 73,730,543 7.02% 195,572 67.95%
QLD (Country)................. 80 1.42% 8,748,501 0.83% 109,356 73.23%
SA (Metro).................... 633 11.25% 78,371,807 7.46% 123,810 70.92%
SA (Regional)................. 0 0.00% 0 0.00% 0 0.00%
SA (Country).................. 90 1.60% 8,884,068 0.85% 98,712 70.68%
WA (Metro).................... 359 6.38% 47,231,311 4.50% 131,564 65.95%
WA (Regional)................. 0 0.00% 0 0.00% 0 0.00%
WA (Country).................. 17 0.30% 1,963,204 0.19% 115,483 67.85%
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).................... 4 0.07% 301,919 0.03% 75,480 76.26%
NT (Regional)................. 0 0.00% 0 0.00% 0 0.00%
NT (Country).................. 2 0.04% 228,547 0.02% 114,274 68.64%
----- ------ ------------- ------ ------- -----
Total....................... 5,629 100.00% 1,050,134,438 100.00% 186,558 68.90%
===== ====== ============= ====== ======= =====
HOUSING LOANS BY LOAN SIZE
NUMBER % OF DOLLAR % OF AVERAGE WGT AVG
OF TOTAL NO. AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
<=100,000..................... 1,606 28.53% 75,237,572 7.16% 46,848 50.71%
> 100,000 and <= 150,000...... 938 16.66% 116,731,169 11.12% 124,447 62.90%
> 150,000 and <= 200,000...... 903 16.04% 156,137,595 14.86% 172,910 68.01%
> 200,000 and <= 250,000...... 682 12.11% 152,001,355 14.47% 222,876 70.87%
> 250,000 and <= 300,000...... 509 9.04% 138,843,874 13.22% 272,778 72.06%
> 300,000 and <= 350,000...... 346 6.15% 111,371,700 10.61% 321,884 71.87%
> 350,000 and <= 400,000...... 211 3.75% 78,037,839 7.43% 369,848 73.43%
> 400,000 and <= 500,000...... 247 4.39% 109,283,978 10.41% 442,445 74.87%
> 500,000 and <= 750,000...... 165 2.93% 94,080,000 8.96% 570,182 69.98%
> 750,000 and <= 950,000...... 20 0.36% 16,243,877 1.55% 812,194 70.23%
> 950,000..................... 2 0.04% 2,165,480 0.21% 1,082,740 74.94%
----- ------ ------------- ------ ------- -----
Total....................... 5,629 100.00% 1,050,134,438 100.00% 186,558 68.90%
===== ====== ============= ====== ======= =====
47
HOUSING LOANS BY POSTCODE CONCENTRATION --
TOP 10 BY LOAN AMOUNT
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
POST-CODE LOANS OF LOANS A$ AMOUNT A$ LVR %
--------- ----- -------- -- ------ -- -----
Liverpool South............ 2170 48 0.85% 10,860,671 1.03% 226,264 71.51%
Ashcroft................... 2168 41 0.73% 9,159,514 0.87% 223,403 76.45%
Cabramatta................. 2166 52 0.92% 9,148,038 0.87% 175,924 70.65%
Benowa..................... 4217 35 0.62% 8,831,787 0.84% 252,337 68.74%
Bradbury................... 2560 42 0.75% 8,055,946 0.77% 191,808 73.42%
Greystanes................. 2145 28 0.50% 7,547,263 0.72% 269,545 72.11%
Bella Vista................ 2153 28 0.50% 7,526,091 0.72% 268,789 71.52%
Carnes Hill................ 2171 26 0.46% 7,451,441 0.71% 286,594 71.11%
Darling Harbour............ 2000 28 0.50% 6,885,606 0.66% 245,914 68.16%
Ten Mile Hollow............ 2250 29 0.52% 6,430,549 0.61% 221,743 71.88%
--- ---- ---------- ---- ------- -----
Total.................... 357 6.34% 81,896,906 7.80% 229,403 71.62%
=== ==== ========== ==== ======= =====
HOUSING LOANS BY LOAN SEASONING
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
<= 3 months................... 4,498 79.90% 879,552,630 83.76% 195,543 68.67%
> 3 and <= 6 months........... 317 5.63% 60,207,174 5.74% 189,928 78.54%
> 6 and <= 12 months.......... 97 1.72% 15,137,801 1.44% 156,060 68.26%
> 12 and <= 18 months......... 33 0.59% 6,666,399 0.63% 202,012 68.20%
> 18 and <= 24 months......... 19 0.34% 3,608,057 0.34% 189,898 72.10%
> 24 and <= 36 months......... 179 3.18% 25,970,440 2.47% 145,086 68.36%
> 36 and <= 48 months......... 100 1.78% 14,201,078 1.35% 142,011 65.62%
> 48 and <= 60 months......... 381 6.77% 44,140,872 4.21% 115,855 61.99%
> 60.......................... 5 0.09% 649,987 0.06% 129,997 64.38%
----- ------ ------------- ------ ------- -----
Total....................... 5,629 100.00% 1,050,134,438 100.00% 186,558 68.90%
===== ====== ============= ====== ======= =====
48
HOUSING LOANS BY MATURITY
NUMBER % OF DOLLAR % OF AVERAGE WGT AVG
OF TOTAL NO. AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
October 15, 2012.............. 6 0.11% 301,137 0.03% 50,190 70.42%
October 15, 2014.............. 1 0.02% 137,679 0.01% 137,679 74.02%
October 15, 2020.............. 2 0.04% 300,974 0.03% 150,487 67.65%
October 15, 2022.............. 3 0.05% 415,914 0.04% 138,638 55.12%
October 15, 2023.............. 176 3.13% 20,229,808 1.93% 114,942 62.26%
October 15, 2028.............. 460 8.17% 59,172,147 5.63% 128,635 64.38%
October 15, 2030.............. 232 4.12% 40,625,402 3.87% 175,109 69.27%
October 15, 2031.............. 513 9.11% 102,165,862 9.73% 199,154 71.56%
October 15, 2032.............. 2,694 47.86% 537,322,940 51.17% 199,452 69.96%
October 15, 2033.............. 1,542 27.39% 289,462,575 27.56% 187,719 67.36%
----- ------ ------------- ------ ------- -----
Total....................... 5,629 100.00% 1,050,134,438 100.00% 186,558 68.90%
===== ====== ============= ====== ======= =====
HOUSING LOANS BY MORTGAGE INSURER
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
PMI Mortgage Insurance........ 1,274 22.63% 268,140,010 25.53% 210,471 71.00%
GE Capital Mortgage Insurance. 3,879 68.91% 724,271,857 68.97% 186,716 68.48%
PMI Indemnity................. 474 8.42% 57,321,299 5.46% 120,931 64.54%
GE Mortgage Insurance (HLIC).. 2 0.04% 401,272 0.04% 200,636 63.08%
----- ------ ------------- ------ ------- -----
Total....................... 5,629 100.00% 1,050,134,438 100.00% 186,558 68.90%
===== ====== ============= ====== ======= =====
49
HOUSING LOANS BY MORTGAGE INSURER AND LVR
PMI MORTGAGE INSURANCE
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
<=20%......................... 82 6.44% 2,585,881 0.96% 31,535 13.77%
>20% and =<25%................ 14 1.10% 1,047,457 0.39% 74,818 22.79%
>25% and =<30%................ 24 1.88% 2,497,172 0.93% 104,049 27.44%
>30% and =<35%................ 38 2.98% 4,914,945 1.83% 129,341 32.58%
>35% and =<40%................ 32 2.51% 4,729,155 1.76% 147,786 37.60%
>40% and =<45%................ 49 3.85% 5,696,829 2.12% 116,262 42.09%
>45% and =<50%................ 60 4.71% 10,307,932 3.84% 171,799 47.66%
>50% and =<55%................ 50 3.92% 9,432,764 3.52% 188,655 51.85%
>55% and =<60%................ 56 4.40% 10,579,687 3.95% 188,923 57.37%
>60% and =<65%................ 66 5.18% 17,095,102 6.38% 259,017 62.62%
>65% and =<70%................ 68 5.34% 15,737,114 5.87% 231,428 67.51%
>70% and =<75%................ 116 9.11% 26,818,076 10.00% 231,190 72.29%
>75% and =<80%................ 215 16.88% 57,344,030 21.39% 266,716 77.49%
>80% and =<85%................ 252 19.78% 64,903,934 24.21% 257,555 80.49%
>85% and =<90%................ 152 11.93% 34,449,932 12.85% 226,644 87.22%
>90% and =<95%................ 0 0.00% 0 0.00% 0 0.00%
>95%.......................... 0 0.00% 0 0.00% 0 0.00%
----- ------ ----------- ------ ------- -----
Total....................... 1,274 100.00% 268,140,010 100.00% 210,471 71.00%
===== ====== =========== ====== ======= =====
50
MORTGAGE LOANS BY MORTGAGE INSURER AND LVR
PMI INDEMNITY
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
<=20%......................... 55 11.60% 1,012,447 1.77% 18,408 13.37%
>20% and =<25%................ 18 3.80% 1,109,720 1.94% 61,651 21.74%
>25% and =<30%................ 13 2.74% 769,708 1.34% 59,208 27.10%
>30% and =<35%................ 14 2.95% 955,965 1.67% 68,283 32.43%
>35% and =<40%................ 24 5.06% 2,962,141 5.17% 123,423 37.79%
>40% and =<45%................ 22 4.64% 2,673,746 4.66% 121,534 43.21%
>45% and =<50%................ 22 4.64% 2,645,681 4.62% 120,258 47.02%
>50% and =<55%................ 18 3.80% 1,904,404 3.32% 105,800 51.85%
>55% and =<60%................ 32 6.75% 4,118,255 7.18% 128,695 57.50%
>60% and =<65%................ 46 9.70% 6,811,612 11.88% 148,079 61.98%
>65% and =<70%................ 27 5.70% 3,676,278 6.41% 136,158 67.48%
>70% and =<75%................ 64 13.50% 9,248,936 16.13% 144,515 72.36%
>75% and =<80%................ 38 8.02% 6,673,681 11.64% 175,623 77.15%
>80% and =<85%................ 55 11.61% 7,671,426 13.38% 139,480 81.46%
>85% and =<90%................ 26 5.49% 5,087,299 8.88% 195,665 87.19%
>90% and =<95%................ 0 0.00% 0 0.00% 0 0.00%
>95%.......................... 0 0.00% 0 0.00% 0 0.00%
--- ------ ---------- ------ ------- -----
Total....................... 474 100.00% 57,321,299 100.00% 120,931 64.54%
=== ====== ========== ====== ======= =====
MORTGAGE LOANS BY MORTGAGE INSURER AND LVR
GE CAPITAL MORTGAGE INSURANCE
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
<=20%......................... 341 8.79% 11,620,818 1.60% 34,079 13.73%
>20% and =<25%................ 65 1.68% 5,693,395 0.79% 87,591 22.49%
>25% and =<30%................ 87 2.24% 8,810,598 1.22% 101,271 27.38%
>30% and =<35%................ 119 3.07% 12,984,568 1.79% 109,114 32.62%
>35% and =<40%................ 112 2.89% 15,371,585 2.12% 137,246 37.47%
>40% and =<45%................ 161 4.15% 22,056,688 3.05% 136,998 42.77%
>45% and =<50%................ 158 4.07% 29,565,552 4.08% 187,124 47.43%
>50% and =<55%................ 191 4.92% 30,782,384 4.25% 161,164 51.91%
>55% and =<60%................ 221 5.70% 41,374,222 5.71% 187,214 57.56%
>60% and =<65%................ 293 7.55% 60,210,481 8.31% 205,497 62.49%
>65% and =<70%................ 322 8.30% 69,133,666 9.55% 214,701 67.67%
>70% and =<75%................ 303 7.81% 69,055,303 9.53% 227,905 72.32%
>75% and =<80%................ 562 14.49% 127,447,903 17.60% 226,776 77.85%
>80% and =<85%................ 552 14.23% 132,225,640 18.26% 239,539 80.50%
>85% and =<90%................ 392 10.11% 87,939,054 12.14% 224,334 88.03%
>90% and =<95%................ 0 0.00% 0 0.00% 0 0.00%
>95%.......................... 0 0.00% 0 0.00% 0 0.00%
----- ------ ----------- ------ ------- -----
Total....................... 3,879 100.00% 724,271,857 100.00% 186,716 68.48%
===== ====== =========== ====== ======= =====
51
MORTGAGE LOANS BY MORTGAGE INSURER AND LVR
GE MORTGAGE INSURANCE (HLIC)
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
<=20%......................... 0 0.00% 0 0.00% 0 0.00%
>20% and =<25%................ 0 0.00% 0 0.00% 0 0.00%
>25% and =<30%................ 0 0.00% 0 0.00% 0 0.00%
>30% and =<35%................ 0 0.00% 0 0.00% 0 0.00%
>35% and =<40%................ 0 0.00% 0 0.00% 0 0.00%
>40% and =<45%................ 0 0.00% 0 0.00% 0 0.00%
>45% and =<50%................ 0 0.00% 0 0.00% 0 0.00%
>50% and =<55%................ 0 0.00% 0 0.00% 0 0.00%
>55% and =<60%................ 1 50.00% 165,647 41.28% 165,647 58.12%
>60% and =<65%................ 0 0.00% 0 0.00% 0 0.00%
>65% and =<70%................ 1 50.00% 235,625 58.72% 235,625 66.56%
>70% and =<75%................ 0 0.00% 0 0.00% 0 0.00%
>75% and =<80%................ 0 0.00% 0 0.00% 0 0.00%
>80% and =<85%................ 0 0.00% 0 0.00% 0 0.00%
>85% and =<90%................ 0 0.00% 0 0.00% 0 0.00%
>90% and =<95%................ 0 0.00% 0 0.00% 0 0.00%
>95%.......................... 0 0.00% 0 0.00% 0 0.00%
- ------ ------- ------ ------- -----
Total....................... 2 100.00% 401,272 100.00% 200,636 63.08%
= ====== ======= ====== ======= =====
HOUSING LOANS BY CURRENT COUPON RATES
NUMBER % OF % OF AVERAGE WGT AVG
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
<= 5.00....................... 0 0.00% 0 0.00% 0 0.00%
> 5.01 and <= 5.50............ 8 0.14% 964,912 0.09% 120,614 74.21%
> 5.51 and <=6.00............. 45 0.80% 9,464,685 0.90% 210,326 71.80%
> 6.01 and <= 6.50............ 853 15.15% 163,135,870 15.53% 191,250 68.79%
> 6.51 and <= 7.00............ 2,189 38.89% 429,347,468 40.89% 196,139 72.98%
> 7.01 and <= 7.50............ 1,032 18.33% 177,812,789 16.93% 172,299 68.09%
> 7.51 and <= 8.00............ 1,158 20.57% 216,512,506 20.62% 186,971 62.74%
> 8.00........................ 344 6.11% 52,896,208 5.04% 153,768 63.49%
----- ------ ------------- ------ ------- -----
Total....................... 5,629 100.00% 1,050,134,438 100.00% 186,558 68.90%
===== ====== ============= ====== ======= =====
52
HOUSING LOANS BY MONTHS REMAINING TO MATURITY
NUMBER % OF DOLLAR % OF AVERAGE WGT AVG
OF TOTAL NO. AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
0-240 Months.................. 188 3.34% 21,385,513 2.04% 113,753 62.39%
241-252 Months................ 0 0.00% 0 0.00% 0 0.00%
253-264 Months................ 0 0.00% 0 0.00% 0 0.00%
265-276 Months................ 0 0.00% 0 0.00% 0 0.00%
277-288 Months................ 0 0.00% 0 0.00% 0 0.00%
289-300 Months................ 460 8.17% 59,172,147 5.63% 128,635 64.38%
301-312 Months................ 0 0.00% 0 0.00% 0 0.00%
313-324 Months................ 232 4.12% 40,625,402 3.87% 175,109 69.27%
325-336 Months................ 513 9.11% 102,165,862 9.73% 199,154 71.56%
337-348 Months................ 2,694 47.86% 537,322,939 51.17% 199,452 69.96%
349-360 Months................ 1,542 27.39% 289,462,575 27.56% 187,719 67.36%
----- ------ ------------- ------ ------- -----
Total....................... 5,629 100.00% 1,050,134,439 100.00% 186,558 68.90%
===== ====== ============= ====== ======= =====
HOUSING LOANS BY INTEREST ONLY PERIOD REMAINING
NUMBER % OF DOLLAR % OF AVERAGE WGT AGT
OF TOTAL NO. AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
0-1 Years..................... 255 9.17% 44,967,029 8.38% 176,341 26.67%
1-2 Years..................... 78 2.80% 17,407,697 3.25% 223,176 69.47%
2-3 Years..................... 28 1.01% 5,316,096 0.99% 189,861 63.69%
3-4 Years..................... 1,178 42.34% 228,950,156 42.68% 194,355 69.99%
4-5 Years..................... 342 12.29% 55,148,431 10.28% 161,253 71.15%
5-6 Years..................... 1 0.04% 55,463 0.01% 55,463 19.29%
6-7 Years..................... 5 0.18% 853,522 0.16% 170,704 75.03%
7-8 Years..................... 6 0.22% 972,845 0.18% 162,141 68.52%
8-9 Years..................... 696 25.02% 146,271,262 27.27% 210,160 66.78%
9-10 Years.................... 193 6.94% 36,487,805 6.80% 189,056 65.83%
----- ------ ----------- ------ ------- -----
Total....................... 2,782 100.00% 536,430,306 100.00% 192,822 65.24%
===== ====== =========== ====== ======= =====
HOUSING LOANS BY LOAN TYPE
NUMBER % OF % OF AVERAGE WGT AGT
OF TOTAL NO. DOLLAR AMOUNT TOTAL A$ BALANCE CURRENT
LOANS OF LOANS A$ AMOUNT A$ LVR %
----- -------- -- ------ -- -----
Standard...................... 3,685 65.46% 693,983,855 66.09% 188,327 72.20%
Latinum Low Doc............... 1,449 25.74% 296,507,959 28.24% 204,629 66.09%
Retro Low Doc................. 495 8.79% 59,642,624 5.68% 120,490 44.55%
----- ------ ------------- ------ ------- -----
Total....................... 5,629 100.00% 1,050,134,438 100.00% 186,558 68.90%
===== ====== ============= ====== ======= =====
53
INTERSTAR RESIDENTIAL LOAN PROGRAM
ORIGINATION PROCESS
The housing loans included in the assets of the trust were originated
by Interstar Securities (Australia) Pty Limited from loan applications received
through its national network of independent accredited mortgage brokers and
funded by the seller as described above. The mortgage brokers may elect to
receive an originator's fee for approved loans at settlement, which will equal a
portion of the interest payments on the housing loans, throughout the term of
such approved housing loan. The originator's fee is an obligation of Interstar
Securities (Australia) Pty Limited and does not evidence an interest in the
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, as required, and credit
history details and ensuring these details satisfy Interstar Securities
(Australia) Pty Limited's underwriting criteria. However, the level of
verification will be less for Low Doc Loans, as described below. The initial
assessment of the applicant is conducted by the mortgage broker on behalf of
Interstar Securities (Australia) Pty Limited, with the application then being
submitted for approval, to Interstar Securities (Australia) Pty Limited based
upon it meeting satisfactory credit standards. Approval of the loan application
is at the total discretion of Interstar Securities (Australia) Pty Limited.
54
All proposed security properties are required to be valued, subject to
a number of exceptions, by a valuer approved by Interstar Securities (Australia)
Pty Ltd. See "Description of the Assets of the Trust -- Representations,
Warranties and Eligibility Criteria". The valuer must be a current member of the
Australian Property Institute, have at least 5 years experience in the
geographical area in which the proposed security property is situated and have
the necessary professional indemnity insurance policy in force.
The valuation report must include the following details:
o the age, condition and size of the security property;
o comparable sale prices to other properties;
o the cost of any repair work required to the security property;
o the insurance replacement value of the security property; and
o any environmental factor that would have an adverse effect on the
value of the security property.
Where more than one property is provided as security, the combined
value of the properties is taken into account.
The prospective borrower must have a satisfactory credit history,
stable employment, evidence of a genuine savings pattern and a minimum 5%
deposit in genuine savings. Gifts, inheritance and money borrowed from other
sources are not genuine savings and are not considered as part of the minimum
"5% deposit" requirement.
Interstar Securities (Australia) Pty Limited requires all borrowers to
satisfy a minimum disposable income level after all commitments, including
allowances for living expenses of the borrower and all dependents and the
proposed housing loan. To further safeguard that the borrower has the capacity
to meet all of his or her commitments, the assessment of the home loan
application is calculated at a rate 2% higher than the applicable rate.
Verification of an applicant's information is central to the approval
process. The mortgage broker obtains such information as:
o in the case of all housing loans apart from Low Doc Loans, tax returns
and an employer confirmation letter;
o in the case of all housing loans, credit checks; and
o in the case of all housing loans other than Retro Low Doc Loans, a
full and detailed current assets and liabilities statement.
This information is then submitted to Interstar Securities (Australia)
Pty Limited for assessment within its current lending criteria.
55
The Latinum Low Doc Loan and Retro Low Doc Loan products, the LOW DOC
LOANS, are made available by Interstar Securities (Australia) Pty Limited to
self-employed borrowers and full-time investors who are unable to provide
financial statements or tax returns at the time of applying for a housing loan.
In the case of a Latinum Low Doc Loan, an applicant must have been self-employed
or a full-time investor for at least 2 years and must have net assets,
post-settlement of the housing loan, of not less than A$50,000. There are no
such minimum requirements in relation to a Retro Low Doc Loan. The income
verification requirements for a Low Doc Loan are less exhaustive than the
verification requirements for housing loans originated through Interstar
Securities (Australia) Pty Limited's standard approval and underwriting process.
In a Latinum Low Doc Loan application, the applicant must disclose his
or her income and is required to execute a declaration stating that the
information in the application is accurate. The applicant is also required to
acknowledge in the application that Interstar Securities (Australia) Pty Limited
will rely on the information in the application in making a decision as to
whether to approve the housing loan. The only income verification made in
relation to a Latinum Low Doc Loan is to confirm that the applicant's asset and
liability statement supports the income disclosed by the applicant in the loan
application.
There is no income verification made in relation to a Retro Low Doc
Loan.
The lending criteria for Low Doc Loans are the same as the lending
criteria for other housing loans originated through Interstar Securities
(Australia) Pty Limited's standard underwriting process, with the exception of
limitations placed on maximum loan amounts and loan-to-value ratios. See "--
Representations, Warranties and Eligibility Criteria".
Upon acceptance of the loan application by Interstar Securities
(Australia) Pty Limited, mortgage insurance coverage must be obtained by the
borrower. All loans through Interstar Securities (Australia) Pty Limited must
have 100% mortgage insurance coverage with the appropriate cash flow cover. This
mortgage insurance coverage remains in force from the date of settlement until
the earliest of discharge, full repayment of the housing loan or payment of a
claim. Full details of the mortgage insurance companies and their respective
ratings are set out separately in this prospectus.
All borrowers in respect of housing loans are natural persons or
corporations. Housing loans to corporations may also be secured by guarantees
from directors. Guarantees may also be obtained in other circumstances.
Upon acceptance of the risk by the mortgage insurer, Interstar
Securities (Australia) Pty Limited then instructs one of its panel solicitors or
settlement agents to prepare the necessary mortgage documentation and forward
same to the borrower for execution. The mortgage documents comprise a loan
agreement document together with a general terms and conditions booklet. Upon
receipt of the executed mortgage documentation, certification of title will then
occur and settlement will take place. Upon settlement, the mortgage is
registered and the documents stored in the safe custody of the issuer trustee. A
condition of settlement is that the mortgagor establish and maintain full
replacement property insurance on the security property for the term of the
housing loan.
Interstar Securities (Australia) Pty Limited's credit policies and
approval procedures are subject to constant review. Improvements in procedures
are continuous. Credit policy may change from time to time due to business
conditions and legal or regulatory changes.
56
GENERAL FEATURES OF THE HOUSING LOANS
The housing loans may consist of one or more of the following types:
NAME OF HOUSING LOAN GENERAL CHARACTERISTICS OF HOUSING LOAN
Interstar "Premium" Access
Account Amortizing principal and interest repayment
(P&I) loans with an interest rate variable at
the discretion of the servicer and
incorporating limited "redraw" facilities
that will be available to borrowers only at
the sole discretion of the trust manager.
Interstar "Fix'n Float" Access
Account Amortizing "P&I" loans with an interest rate
fixed for a specific initial period of up to
five years after which the interest rate
converts to a variable rate at the discretion
of the servicer.
Interstar "IO Float" Access
Account Non-amortizing loans requiring interest only
repayments by the borrowers for a specific
initial period of up to ten years with an
interest rate variable at the discretion of
the servicer. At the expiration of the
initial period the loans convert to the
standard amortizing "P&I" loans with an
interest rate variable at the discretion of
the servicer.
Interstar "IO Fixed" Access
Account Non-amortizing loans requiring interest only
repayments by the borrowers for a specific
initial period of up to five years with an
interest rate fixed for this initial period.
At the expiration of the initial period the
loans convert to the standard amortizing
"P&I" loans with an interest rate variable at
the discretion of the servicer.
Interstar "Line of Credit"
Access Account Non-amortizing loans requiring
interest only repayments by the borrowers for
a specific period of up to ten years with an
interest rate variable at the discretion of
the servicer, and incorporating facilities
that allow borrowers to:
o draw funds up to a pre-determined
amortizing limit;
o repay some or all of those funds; and
o redraw those funds again up to the
then-current amortized limit subject
always to such right to redraw funds
being at the absolute discretion of the
servicer, during the life of the loan
facility.
Interstar "Split" Access
Account A combined facility which:
o as to a specified Australian dollar
proportion of the facility has the
general characteristics of one type of
housing loan as referred to above; and
57
o as to the remaining Australian dollar
proportion of the facility has the
general characteristics of another type
of housing loan as referred to above.
Each housing loan may have some or all of the features described in
this section. In addition, during the term of any housing loan the servicer may
agree to change any of the terms of that housing loan from time to time at the
request of the borrower.
SPECIAL FEATURES OF THE HOUSING LOANS
REDRAWS
Most housing loans, excluding fixed rate loans, provide borrowers with
a facility which allows borrowers to be provided with redraws. These redraws may
be accessed by way of direct credit to the relevant borrower's nominated bank
account, by electronic funds transfer or by check payments. This facility is
provided to a borrower at the absolute discretion of the servicer.
If a borrower makes any repayments under its housing loan which are in
addition to those that he or she is legally obliged to make under the terms of
the housing loan agreement on application by the borrower, the issuer trustee
must provide a redraw of principal repayments made in excess of the scheduled
principal repayments to the borrower, upon being so directed by the trust
manager in its absolute discretion, and subject to the trust manager certifying
to the issuer trustee that:
o the redraw to be provided to the borrower together with the current
Unpaid Balance of the housing loan will not exceed the scheduled
balance of the housing loan;
o after allowing for all payments which the issuer trustee is then
required to make or which the trust manager reasonably expects that
the issuer trustee will be required to make, there is or will be
sufficient cash in the assets of the trust for the issuer trustee to
provide that redraw; and
o the housing loan is not in arrears at the time of the request for the
redraw by the borrower.
A redraw will not result in the housing loan being removed from the
trust.
DIRECT DEBIT AUTHORITY
The servicer has arranged for the borrowers to execute a direct debit
authority so that payments under the borrower's mortgage loan will be directly
debited from the borrower's designated checking account. In certain cases the
servicer has arranged for National Australia Bank Limited to provide checking
account and direct entry paperless services in order to offer borrowers an
expanded range of financial services that are directly linked to the borrower's
mortgage loan account. The provision of these facilities has been documented in
a Check Deposit and Direct Paperless Entry Facilities Agreement between National
Australia Bank Limited, the servicer and the issuer trustee. All mortgage loan
payments deducted from a borrower's checking account, whether with National
Australia Bank Limited, another bank or other financial institutions, will be
credited to a trust account in Perpetual Trustees Victoria Limited's name
established with National Australia Bank Limited.
58
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.
59
THE MORTGAGE INSURANCE POLICIES
GENERAL
Each housing loan acquired by the trust will be insured by one of PMI
Indemnity Limited -- formerly CGU Lenders Mortgage Insurance Limited -- GE
Capital Mortgage Insurance Corporation (Australia) Pty Ltd, PMI Mortgage
Insurance Ltd or GE Mortgage Insurance Pty Ltd The mortgage insurance policy in
relation to each housing loan is provided by the mortgage insurer at the time
that the housing loan is originated The issuer trustee is the insured party
under each mortgage insurance policy in respect of each housing loan The
insurance provided under each mortgage insurance policy covers 100% of the
principal balance and any unpaid interest on the housing loan insured regardless
of the LVR of that housing loan This section is a summary of the general
provisions of the mortgage insurance policies.
CERTAIN PROVISIONS OF MORTGAGE INSURANCE POLICIES
RESTRICTIONS AND CANCELLATION
The amount recoverable under each mortgage insurance policy will
generally be:
o the whole of the loan amount due under the housing loan;
o any reasonable expenses incurred in enforcing the housing loan and any
mortgage and/or guarantee securing that housing loan;
o any unpaid interest calculated at the interest rate applicable if
interest is paid on the due date; and
o the timely payment for a period of at least 12 months after the date
upon which a claim is made under that contract of interest payments
under the housing loan which remain outstanding for a period of 14
days.
The actual amounts recoverable, and the amounts to be deducted, vary
between the policies For example, rent on the mortgaged property and insurance
proceeds not spent on restoration or repair which are received by the issuer
trustee may reduce amounts payable by the insurer under a mortgage insurance
policy.
There are a number of requirements and restrictions imposed on the
insured under each mortgage insurance policy which may entitle the relevant
insurer to cancel the policy or reduce the amount of a claim Depending on the
mortgage insurance policy, these may include:
o the existence of an encumbrance or other interest which affects or has
priority over the relevant mortgage;
o the relevant mortgage, the relevant housing loan or a guarantee or
indemnity relating to the housing loan ceasing to be effective;
o if there is a material omission or misstatement by the insured in
relation to the policy;
o that any premium is not paid when due or within the relevant grace
period, if any;
60
o if there is physical damage to the relevant mortgaged property;
o a breach by the insured of the policy; and
o certain circumstances which affect the insured's rights or recoveries
under the relevant housing loan or mortgage.
EXCLUSIONS
A mortgage insurance policy may not, depending on its terms, cover any
loss arising from specified events, such as war, nuclear occurrence and
contamination.
UNDERTAKING
Under a mortgage insurance policy, the insured may have an obligation
to, among other things:
o report arrears or other defaults on the relevant housing loan;
o report amounts outstanding under that relevant housing loan;
o report procedures being taken in respect of a defaulted housing loan,
including enforcement of the relevant mortgage or the taking of
possession of any relevant mortgaged property;
o make all claims within a particular period and in a particular form;
and
o ensure that the terms of the relevant housing loan require that a
general insurance policy is in place in respect of the relevant
mortgaged property.
PERIOD OF COVER
All mortgage insurance policies provide cover with effect from the date
of settlement of a housing loan until the discharge, the full repayment of the
housing loan or payment of a claim, whichever is the earliest See "Interstar
Residential Loan Program -- Approval and Underwriting Process".
VARIATIONS
Variations in respect of a mortgage insurance policy may be made with
the approval of the relevant mortgage insurer.
VARIANCE BETWEEN POLICIES
Each mortgage insurance policy has different provisions The above is a
summary of certain provisions -- some may not relate to, or may differ from, a
particular mortgage insurance policy.
61
TRUST MANAGER UNDERTAKINGS WITH RESPECT TO INSURANCE POLICIES
Under the series notice, the trust manager undertakes:
o not to take any action in respect of a housing loan which is contrary
to the terms of any mortgage insurance policy without the approval of
the relevant mortgage insurer; and
o to take such steps as are reasonably available to it to ensure that a
mortgage insurer is not relieved from its liability under a mortgage
insurance policy.
DESCRIPTION OF THE MORTGAGE INSURERS
PMI MORTGAGE INSURANCE LTD AND PMI INDEMNITY LIMITED (FORMERLY CGU LENDERS
MORTGAGE INSURANCE LIMITED)
PMI Mortgage Insurance Ltd, previously known as MGICA Ltd, has been
providing lenders' mortgage insurance in Australia since 1965 and in New Zealand
since 1988.
PMI Mortgage Insurance Ltd's parent is PMI Mortgage Insurance Australia
(Holdings) Pty Limited, a subsidiary of PMI Mortgage Insurance Co which is a
subsidiary of the PMI Group Inc PMI Mortgage Insurance Co is a leading monoline
mortgage insurer in the United States currently having an insurer financial
strength rating of AA+ (negative outlook) by S&P, AA+ (stable) by Fitch Ratings
and Aa2 by Moody's.
As of December 31, 2002, PMI Mortgage Insurance Ltd insures
approximately 482,417 mortgage loans in excess of A$579 billion and had total
assets of A$535 million and shareholders' equity of A$287 million PMI Mortgage
Insurance Ltd currently has a financial strength rating of AA (negative outlook)
by S&P, AA (stable) by Fitch Ratings and Aa3 by Moody's.
PMI Indemnity Limited, previously named CGU Lenders Mortgage Insurance
Limited, was formed in 1971 to provide mortgage lenders with protection against
loss arising from borrower default on residential mortgages On September 14,
2001, PMI Indemnity Limited was acquired by PMI Mortgage Insurance Australia
(Holdings) Pty Limited.
As of December 31, 2002, PMI Indemnity Limited insures approximately
232,965 mortgage loans in excess of A$270 billion and had total assets of A$196
million and shareholders' equity of A$106 million PMI Indemnity Limited
currently has an insurer financial strength rating of AA- (negative outlook) by
S&P, AA (stable) by Fitch Ratings and Aa3 by Moody's.
PMI Mortgage Insurance Co currently has an AA+ (negative outlook)
Insurer Finance Strength rating from S&P As of May 1, 2003, S&P has revised its
outlook on PMI Mortgage Insurance Co and rated subsidiaries, including PMI
Mortgage Insurance Ltd and PMI Indemnity Limited, from "stable" to "negative
outlook" If S&P lowers its credit rating on PMI Indemnity Limited or PMI
Mortgage Insurance Ltd below AA-, then S&P could lower its rating on the Class B
notes No assurances are given regarding any future outlook or the future levels
of the credit ratings of PMI Mortgage Insurance Ltd and PMI Indemnity Limited by
any of S&P, Moody's or Fitch Ratings.
The business address of each of PMI Mortgage Insurance Ltd and PMI
Indemnity Limited is Level 23, 50 Bridge Street, Sydney, New South Wales.
62
GE CAPITAL MORTGAGE INSURANCE CORPORATION (AUSTRALIA) PTY LTD AND GE MORTGAGE
INSURANCE PTY LTD
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 Australian lenders' mortgage insurance
market.
On December 12, 1997, the Australian Commonwealth Government:
o Transferred the liabilities of Housing Loans Insurance Corporation in
relation to contracts of insurance entered into by Housing Loans
Insurance Corporation before December 12, 1997 to the Australian
Commonwealth Government;
o Appointed a new corporation, Housing Loans Insurance Corporation Ltd,
which has since changed its name to Housing Loans Insurance
Corporation Pty Ltd, to manage these contracts of insurance on behalf
of the Commonwealth of Australia; and
o Sold Housing Loans Insurance Corporation Pty Ltd to GE Capital
Australia Ltd, an indirect wholly-owned subsidiary of the General
Electric Company, a corporation chartered under the laws of the State
of New York with its corporate headquarters in Fairfield, Connecticut.
Housing Loans Insurance Corporation Pty Ltd changed its name to GE
Mortgage Insurance Pty Ltd as of February 14, 2000.
GE Capital Mortgage Insurance Corporation (Australia) Pty Ltd,
commenced operations in March 1998.
It is a wholly-owned subsidiary of GE Capital Australia Limited, whose
ultimate parent is General Electric Company General Electric Company is a
diversified industrial and financial services company with operations in over
100 countries General Electric Company is currently rated AAA by S&P and Aaa by
Moody's General Electric Company is the indirect owner of lenders' mortgage
insurance businesses in the United States, United Kingdom, Canada and Australia
which collectively insured over US$165 billion of loans worldwide.
As of December 31, 2002, GE Mortgage Insurance Pty Ltd had total assets
of A$3515 million shareholders' equity of A$648 million and statutory reserves
- -- claims equalization reserve -- of A$1252 million GE Mortgage Insurance Pty
Ltd currently has a claims paying ability rating of AA by S&P and Fitch and Aa2
by Moody's.
As of December 31, 2002, GE Capital Mortgage Insurance Corporation
(Australia) Pty Ltd had total assets of A$6048 million, shareholders' equity of
A$2061 million and statutory reserves -- claims equalization reserve -- of A$217
million GE Capital Mortgage Insurance Corporation (Australia) Pty Ltd currently
has a claims paying ability rating of AA by S&P and Fitch and Aa2 by Moody's.
The business address of GE Capital Mortgage Insurance Corporation
(Australia) Pty Ltd is Level 23, 259 George Street, Sydney, New South Wales.
63
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.
64
The policy also continues to provide protection if:
o the issuer trustee acquires all or part of the estate or interest in
the relevant property by foreclosure or any other legal manner which
discharges the relevant mortgage;
o a successor acquires an interest in the relevant mortgage; or
o a successor acquires the relevant mortgage or the estate or interest
in the relevant property by operation of law and not purchase.
REFUSAL OR REDUCTION IN CLAIM
Title insurance policies may not provide cover, or may provide a
reduced amount of cover, for losses arising as a result of, among other things:
o any material misstatement, omission or misrepresentation in connection
with obtaining the policies; or
o any material breach of the terms and conditions of the policies.
EXCLUSIONS
The title insurer will not provide cover under the title insurance
policy resulting from, among other things:
o restrictions or rights that are noted on the title to the land on the
policy date;
o the existence of laws which restrict or prohibit the use of the land
or the breach of those laws;
o environmental contaminants or hazardous waste under the land;
o native title claims in relation to the land;
o risks which:
o the insured at any time created, allowed or agreed to;
o were known to the insured but not to the title insurer on or
prior to the policy date;
o cause no loss to the insured;
o come into existence or are recorded in any public records after
the date upon which the relevant mortgage is registered; or
o result in any loss of priority because the insured makes further
advances despite knowing the existence of subsequent charges;
65
o if the relevant mortgage is or is claimed to be unenforceable or
otherwise affected because the insured failed to comply with or
breached the Consumer Credit Legislation or laws relating to the
doing of business and the providing of credit; or
o if the insured is liable to pay compensation, penalties, etc, to
any person because the insured failed to comply with or breached
any credit laws.
DESCRIPTION OF TITLE INSURER
First American Title Insurance Company of Australia Pty Limited is a
subsidiary of First American Title Insurance Company, a specialist title insurer
and a diversified provider of business information and related products and
services in the United States.
First American Title Insurance Company was founded over 113 years ago
with revenues of US$47 billion and approximately 24,886 employees worldwide in
2002 First American Title Insurance Company is publicly traded on the New York
Stock Exchange through its holding company, the First American Financial
Corporation.
AM Best Company, an insurance company ratings and information agency,
affirmed in 2002 the current rating for First American Title Insurance Company
of Australia Pty Limited of A+ (Superior) AM Best Company evaluates title
insurers from both an insurance and general industry perspective.
First American Title Insurance Company and First American Financial
Corporation have a rating of "A-" from S&P First American Financial
Corporation's senior debt is rated "stable" by S&P.
66
DESCRIPTION OF THE US$ NOTES
GENERAL
The issuer trustee will issue the US$ notes on the closing date
pursuant to a direction from the trust manager to the issuer trustee to issue
the notes and the terms of the master trust deed, the series notice and the note
trust deed The notes will be governed by the laws of New South Wales, Australia
The following summary describes the material terms of the notes (including the
US$ notes) The summary does not purport to be complete and is subject to the
terms and conditions of the transaction documents, any fixed-floating rate swaps
and the currency swaps.
FORM OF THE US$ NOTES
BOOK-ENTRY REGISTRATION
The US$ notes will be issued only in registered book-entry form in
minimum denominations of US$100,000 and multiples of US$1,000 in excess of that
amount Unless definitive notes are issued, all references to actions by the US$
noteholders will refer to actions taken by The Depository Trust Company (DTC)
upon instructions from its participating organizations and all references in
this prospectus to distributions, notices, reports and statements to US$
noteholders will refer to distributions, notices, reports and statements to DTC
or its nominee, as the registered noteholder, for distribution to owners of the
US$ notes in accordance with DTC's procedures.
US$ noteholders may hold their interests in the notes through DTC, in
the United States, or through Clearstream Banking, societe anonyme (CLEARSTREAM,
LUXEMBOURG) or the Euroclear System (EUROCLEAR), in Europe, if they are
participants in those systems, or indirectly through organizations that are
participants in those systems Cede & Co, as nominee for DTC, will be the
registered noteholder of the US$ notes Clearstream, Luxembourg and Euroclear
will hold omnibus positions on behalf of their respective participants, through
customers' securities accounts in Clearstream, Luxembourg's and Euroclear's
names on the books of their respective depositaries The depositaries in turn
will hold the positions in customers' securities accounts in the depositaries'
names on the books of DTC.
DTC has advised the trust manager and the underwriters that it is:
o limited-purpose trust company organized under the New York Banking
Law;
o "banking organization" within the meaning of the New York Banking Law;
o a member of the Federal Reserve System;
o a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
o a "clearing agency" registered under the provisions of Section 17A of
the United States Securities Exchange Act of 1934 (the EXCHANGE ACT).
DTC holds securities for its participants and facilitates the clearance
and settlement among its participants of securities transactions, including
transfers and pledges, in deposited securities through electronic book-entry
changes in its participants' accounts This eliminates the need for physical
movement of securities DTC participants include securities brokers and dealers,
banks,
67
trust companies, clearing corporations and other organizations Indirect access
to the DTC system is also available to others including securities brokers and
dealers, banks, and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly The rules
applicable to DTC and its participants are on file with the Securities and
Exchange Commission (the SEC).
Transfers between participants on the DTC system will occur in
accordance with DTC's rules Transfers between participants on the Clearstream,
Luxembourg system and participants on the Euroclear system will occur in
accordance with their rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream,
Luxembourg participants or Euroclear participants, on the other, will be
effected by DTC in accordance with DTC's rules on behalf of the relevant
European international clearing system by that system's depositary However,
these cross-market transactions will require delivery of instructions to the
relevant European international clearing system by the counterparty in that
system in accordance with its rules and procedures and within its established
deadlines, European time The relevant European international clearing system
will, if the transaction meets its settlement requirements, deliver instructions
to its depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC Clearstream, Luxembourg participants and Euroclear participants may not
deliver instructions directly to their system's depositary.
Because of time-zone differences, credits of securities in Clearstream,
Luxembourg or Euroclear as a result of a transaction with a DTC participant will
be made during the subsequent securities settlement processing, dated the
business day following the DTC settlement date The credits for any transactions
in these securities settled during this processing will be reported to the
relevant Clearstream, Luxembourg participant or Euroclear participant on that
business day Cash received in Clearstream, Luxembourg or Euroclear as a result
of sales of securities by or through a Clearstream, Luxembourg participant or a
Euroclear participant to a DTC participant will be received and available on the
DTC settlement date However, it will not be available in the relevant
Clearstream, Luxembourg or Euroclear cash account until the business day
following settlement in DTC.
Purchases of US$ notes held through the DTC system must be made by or
through DTC participants, which will receive a credit for the US$ notes on DTC's
records The ownership interest of each actual US$ noteholder is in turn to be
recorded on the DTC participants' and indirect participants' records US$
noteholders will not receive written confirmation from DTC of their purchase
However, noteholders are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings,
from the DTC participant or indirect participant through which the noteholder
entered into the transaction Transfers of ownership interests in the US$ notes
are to be accomplished by entries made on the books of DTC participants acting
on behalf of the US$ noteholders US$ noteholders will not receive definitive
notes representing their ownership interest in US$ notes unless use of the
book-entry system for the US$ notes is discontinued.
To facilitate subsequent transfers, all securities deposited by DTC
participants with DTC are registered in the name of DTC's nominee, Cede & Co The
deposit of securities with DTC and their registration in the name of Cede & Co
effects no change in beneficial ownership DTC has no knowledge of the actual
holders of the US$ notes; DTC's records reflect only the identity of the
68
DTC participants to whose accounts the US$ notes are credited, which may or may
not be the actual beneficial owners of the US$ notes The DTC participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to DTC
participants, by DTC participants to indirect participants, and by DTC
participants and indirect participants to US$ noteholders will be governed by
arrangements among them and by any statutory or regulatory requirements as may
be in effect from time to time.
Neither DTC nor Cede & Co will consent or vote on behalf of the notes
Under its usual procedures, DTC mails an omnibus proxy to the issuer trustee as
soon as possible after the record date, which assigns Cede & Co's consenting or
voting rights to those DTC participants to whose accounts the US$ notes are
credited on the record date, identified in a listing attached to the proxy.
Principal and interest payments on the US$ notes will be made to DTC
DTC's practice is to credit its participants' accounts on the applicable payment
date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on that payment date
Standing instructions, customary practices, and any statutory or regulatory
requirements as may be in effect from time to time will govern payments by DTC
participants to US$ noteholders These payments will be the responsibility of the
DTC participant and not of DTC, the issuer trustee, the note trustee or the
principal paying agent Payment of principal and interest to DTC is the
responsibility of the issuer trustee, disbursement of the payments to DTC
participants is the responsibility of DTC, and disbursement of the payments to
US$ noteholders is the responsibility of DTC participants and indirect
participants.
DTC may discontinue providing its services as securities depository for
the notes at any time by giving reasonable notice to the principal paying agent
Under these circumstances, if a successor securities depository is not obtained,
definitive notes are required to be printed and delivered.
According to DTC, the foregoing information about DTC has been provided
for informational purposes only and is not intended to serve as a
representation, warranty, or contract modification of any kind.
Clearstream, Luxembourg is a company with limited liability
incorporated under the laws of Luxembourg Clearstream, Luxembourg holds
securities for its participating organizations and facilitates the clearance and
settlement of securities transactions between Clearstream, Luxembourg
participants through electronic book-entry changes in accounts of Clearstream,
Luxembourg participants, thereby eliminating the need for physical movement of
notes Transactions may be settled in Clearstream, Luxembourg in any of 31
currencies, including US 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.
69
Euroclear was created in 1968 to hold securities for its participants
and to clear and settle transactions between Euroclear participants through
simultaneous electronic book-entry delivery against payment This eliminates the
need for physical movement of notes Transactions may be settled in any of 32
currencies, including US dollars.
Euroclear is owned by Euroclear Clearance System Public Limited Company
and operated through a license agreement by Euroclear Bank SA/NV, a bank
incorporated under the laws of the Kingdom of Belgium, the EUROCLEAR OPERATOR
The Euroclear Operator is regulated and examined by the Belgian Banking and
Finance Commission and the National Bank of Belgium.
Euroclear participants include banks, including central banks,
securities brokers and dealers and other professional financial intermediaries
Indirect access to Euroclear is also available to other firms that maintain a
custodial relationship with a Euroclear participant, either directly or
indirectly.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the "Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System" These terms and
conditions govern transfers of securities and cash within Euroclear, withdrawal
of securities and cash from Euroclear, and receipts of payments for securities
in Euroclear All securities in Euroclear are held on a fungible basis without
attribution of specific notes to specific securities clearance accounts The
Euroclear Operator acts under these terms and conditions only on behalf of
Euroclear participants and has no record of or relationship with persons holding
through Euroclear participants.
Distributions on the US$ notes held through Clearstream, Luxembourg or
Euroclear will be credited to the cash accounts of Clearstream, Luxembourg
participants or Euroclear participants in accordance with the relevant system's
rules and procedures, to the extent received by its depositary Clearstream,
Luxembourg or the Euroclear Operator, as the case may be, will take any other
action permitted to be taken by a US$ noteholder on behalf of a Clearstream,
Luxembourg participant or Euroclear participant only in accordance with its
rules and procedures, and depending on its depositary's ability to effect these
actions on its behalf through DTC.
Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of US$ notes among
participants of DTC, Clearstream, Luxembourg and Euroclear, they are under no
obligation to perform or continue to perform these procedures and these
procedures may be discontinued at any time.
DEFINITIVE NOTE
Notes issued in definitive form are referred to in this prospectus as
"definitive notes" US$ notes will be issued as definitive notes, rather than in
book entry form to DTC or its nominees, only if one of the following events
occurs:
o the principal paying agent advises the trust manager in writing that
DTC is no longer willing or able to discharge properly its
responsibilities as depository for the US$ notes, and the trust
manager is not able to locate a qualified successor;
o the issuer trustee, at the direction of the trust manager, advises the
principal paying agent in writing that it elects to terminate the
book-entry system through DTC; or
70
o after the occurrence of an event of default, the note trustee, at the
written direction of noteholders holding a majority of the outstanding
principal balance of the US$ notes, advises the issuer trustee and the
principal paying agent, that the continuation of a book-entry system
is no longer in the best interest of the US$ noteholders.
Definitive notes will be transferable and exchangeable at the offices
of the note registrar, which is initially the principal paying agent located at
101 Barclay Street 21W New York, NY 10286 The note registrar will not impose a
service charge for any registration of transfer or exchange, but may require
payment of an amount sufficient to cover any tax or other governmental charge.
A definitive note may be transferred in whole or in part in an
authorized denomination upon the surrender of the definitive note, at the office
of the note registrar together with the form of transfer endorsed on it duly
completed and executed.
The note registrar shall not be required to register the transfer or
exchange of any definitive notes within 10 days preceding a payment date.
DISTRIBUTIONS ON THE NOTES
Collections in respect of interest and principal will be received
during each Collection Period Collections include the following:
o payments of interest, principal and fees, including prepayments of
principal under the housing loans;
o proceeds from the enforcement of the housing loans and registered
mortgages relating to those housing loans;
o amounts received under mortgage insurance policies and title insurance
policies;
o amounts received under any fixed-floating rate swaps and the currency
swaps;
o income in respect of authorized investments of the trust; and
o interest on amounts in the collection account.
The issuer trustee will make payments on a quarterly basis on each
payment date On each payment date, the principal paying agent will distribute,
indirectly through DTC and/or the depositaries, principal and interest, to the
owners of record of the US$ notes as of the date which is 4 business days prior
to that payment date if the US$ notes are held in book-entry form, or, if the
US$ notes are held in definitive form, the last day of the prior calendar month
Payments on the definitive notes will be made to the US$ noteholder of record by
US$ check drawn on a bank in New York City and either mailed to the address of
the US$ noteholder shown on the register as of 4:00 pm Melbourne time on the
date that is four business days before the payment date or transferred to a US$
account maintained by the US$ noteholder with a bank in New York City.
71
KEY DATES AND PERIODS
The following are the relevant dates and periods for the allocation of
cashflows and their payments.
COLLECTION PERIOD ............. with respect to a payment date, the period
from, and including, the date which is 6
business days before the payment date preceding
that payment date to, but excluding, the date
which is 6 business days before that payment
date However, the first and last Collection
Periods are as follows:
o first: period from and excluding the
initial cut-off date to and including June
3, 2004; and
o last: period from and including the date
which is 6 business days before the
payment date immediately prior to the
final payment date to and excluding the
day which is 6 business days before that
final payment date.
INTEREST PERIOD ............... with respect to a note, each period from and
including a payment date to and excluding the
next payment date However, the first and last
Interest Periods for each note are as follows:
o first: period from and including the
closing date to and excluding the first
payment date; and
o last: period from and including the
payment date prior to the earlier of the
final maturity date and the date on which
the relevant note is redeemed in full to
and excluding the final maturity date or
the date on which the relevant note is so
redeemed.
DETERMINATION DATE ............ with respect to a payment date, the date which
is 4 business days before that payment date or,
if that date is not a business day, then the
next business day unless that day falls in the
next calendar month, in which case the
Determination Date will be the preceding
business day.
PAYMENT DATE .................. the 14th day or, if the 14th day is not a
business day, then the next business day of
each March, June, September and December unless
that day falls in the next calendar month, in
which case the payment date will be the
preceding business day The first payment date
will be in June 2004.
72
EXAMPLE CALENDAR
The following example calendar for a quarter assumes that all relevant.
days are business days.
COLLECTION PERIOD .............. March 8th to June 30th
INTEREST PERIOD ................ March 14th to June 13th
DETERMINATION DATE ............. June 10th
PAYMENT DATE ................... June 14th
CALCULATION OF INCOME
On each Determination Date, the trust manager will calculate the Income
for the immediately preceding Collection Period.
INCOME
INCOME for a Collection Period means all moneys, rights and property
which is received by the issuer trustee during that Collection Period by way of
interest or otherwise in the nature of income in respect of the Authorized
Investments, including the housing loans, of the trust including:
o amounts attributable to interest received under any fixed-floating
rate swaps and the currency swaps;
o interest on income and any other monies received;
o amounts in the nature of, or attributable to, interest derived under a
mortgage insurance policy or title insurance policy;
o interest and fees received from borrowers under the housing loans; and
o break payments received from mortgage insurers or borrowers under the
housing loans.
APPLICATION OF MORTGAGE PRINCIPAL REPAYMENTS AND LIQUID AUTHORIZED INVESTMENTS
TO AVAILABLE INCOME
The Trust Manager must ensure that, subject to the paragraph below, the
trust will at all times have Liquid Authorized Investments at any time not less
than 1% or such other percentage as determined by the trust manager and
confirmed by each rating agency of the sum of the outstanding Principal Amount
of any Redraw notes, the Class A A$ Equivalent of the outstanding Principal
Amount of the Class A notes, the Class AB A$ Equivalent of the outstanding
Principal Amount of the Class AB notes and the Class B A$ Equivalent of the
outstanding Principal Amount of the Class B notes. Such amount shall be known as
the PRESCRIBED MINIMUM LEVEL. At closing, the Liquid Authorized Investments will
be acquired with the net proceeds from the sale of
73
the notes and will, to the extent necessary, be replenished on each payment date
with Mortgage Principal Repayments to the extent they are available as described
below under "-- Additional Income Payments" and "-- Principal Distributions".
If the trust manager determines on any Determination Date that the
Income of the trust for the Collection Period ending immediately prior to that
Determination Date is insufficient to meet the Primary Expenses of the trust for
that Collection Period, then the trust manager will direct the issuer trustee to
apply, first, the Liquid Authorized Investments and, then, if the Liquid
Authorized Investments are insufficient, Mortgage Principal Repayments, to cover
such INCOME SHORTFALL to the extent available.
Income received during a Collection Period and any Mortgage Principal
Repayments and Liquid Authorized Investments applied as described above will
constitute AVAILABLE INCOME.
DISTRIBUTION OF AVAILABLE INCOME
On each payment date prior to the enforcement of the security trust
deed, based on the calculations, instructions and directions provided to it by
the trust manager on or before the date which is 4 business days before that
payment date, the issuer trustee must pay or cause to be paid out of the
Available Income for the Collection Period ending immediately before that
payment date, the following amounts, which together constitute the PRIMARY
EXPENSES, in the following order of priority:
o first, an amount equal to the Accrued Interest Adjustment to the
seller;
o second, any taxes payable in relation to the trust;
o third, in the following order of priority, in payment of:
o pro rata:
o the issuer trustee's fee for the Collection Period; and
o any fees payable to the note trustee for the Collection
Period;
o pro rata:
o any fees payable pro rata to the paying agents for the
Collection Period;
o any fees payable to the calculation agent for the Collection
Period;
o any fees payable to the note registrar for the Collection
Period;
o the expenses of the trust -- other than any fees payable to the
issuer trustee, the note trustee, the paying agents, the
calculation agent, the note registrar, the trust manager and the
servicer -- in relation to the Collection Period;
o the expenses of the trust -- other than any fees payable to the
issuer trustee, the note trustee, the paying agents, the
calculation agent, the note registrar, the trust manager and the
servicer -- which the trust manager or the issuer trustee
reasonably anticipates will be incurred prior to the next payment
date; and
74
o the expenses of the trust -- other than any fees payable to the
issuer trustee, the note trustee, the paying agents, the
calculation agent, the note registrar, the trust manager and the
servicer -- not covered by the two previous bullet points above
which have already been incurred prior to the payment date but
which have not previously been paid or reimbursed;
o fourth, pro rata:
o the trust manager's fee for the Collection Period; and
o the servicer's fee for the Collection Period;
o fifth, pro rata:
o any amounts payable to the fixed-floating rate swap provider
under any fixed-floating rate swaps other than any break costs in
respect of the termination of a fixed floating rate swap;
o any interest on any Redraw notes for the Interest Period ending
on that payment date to the Redraw noteholders;
o (1) the Class A A$ Interest Amount for that payment date to the
currency swap provider and the reciprocal payment by the currency
swap provider is thereafter to be applied towards payment of
interest on the Class A notes, including interest due but unpaid
from any previous payment date or (2) if the Class A currency
swap is terminated, an A$ amount that the trust manager
determines in good faith to be applied on that payment date in
order to enable the issuer trustee to meet its obligations to pay
interest on the Class A notes, to the note trustee for purchase
of U.S. dollars at the spot exchange rate to be applied towards
payment of interest on the Class A notes on that payment date,
including interest due but unpaid from any previous payment date;
and
o to the currency swap provider any break costs payable to the
currency swap provider under the Class A currency swap other than
in respect of the termination of the Class A currency swap where
the currency swap provider is the defaulting party, as such term
is defined in the Class A currency swap;
o sixth, pro rata:
o (1) the Class AB A$ Interest Amount for that payment date to the
currency swap provider and the reciprocal payment by the currency
swap provider is thereafter to be applied towards payment of
interest on the Class AB notes, including interest due but unpaid
from any previous payment date or (2) if the Class AB currency
swap is terminated, an A$ amount that the trust manager
determines in good faith to be applied on that payment date in
order to enable the issuer trustee to meet its obligations to pay
interest on the Class AB notes, to the note trustee for purchase
of U.S. dollars at the spot exchange rate to be applied towards
payment of interest on the Class AB notes on that payment date,
including interest due but unpaid from any previous payment date;
75
o to the currency swap provider any break costs payable to the
currency swap provider under the Class AB currency swap other
than in respect of the termination of the Class AB currency swap
where the currency swap provider is the defaulting party, as such
term is defined in the Class AB currency swap;
o seventh, pro rata:
o (1) the Class B A$ Interest Amount for that payment date to the
currency swap provider and the reciprocal payment by the currency
swap provider is thereafter to be applied towards payment of
interest on the Class B notes, including interest due but unpaid
from any previous payment date or (2) if the Class B currency
swap is terminated, an A$ amount that the trust manager
determines in good faith to be applied on that payment date in
order to enable the issuer trustee to meet its obligations to pay
interest on the Class B notes, including interest due but unpaid
from any previous 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 B notes on that payment date,
including interest due but unpaid from any previous payment date;
and
o to the currency swap provider any break costs payable to the
currency swap provider under the Class B currency swap other than
in respect of the termination of the Class B currency swap where
the currency swap provider is the defaulting party, as such term
is defined in the Class B currency swap.
The issuer trustee shall only make a payment described in any of the
preceding bullet points in this section to the extent that any Available Income
remains from which to make the payment after amounts with priority to that
payment have been fully paid.
ADDITIONAL INCOME PAYMENTS
On each payment date prior to the enforcement of the security trust
deed, based on the calculations, instructions and directions provided to it by
the trust manager, the issuer trustee must pay or cause to be paid out of any
Income for the Collection Period available after paying the Primary Expenses
referred to above the following amounts in the following order of priority:
o first, to be applied by the issuer trustee as Mortgage Principal
Repayments for the corresponding Collection Period, of an amount equal
to all amounts previously applied under the first bullet point under
the heading "-- Principal Distributions", to the extent not previously
so replenished;
o second, to reduce the Aggregate Principal Loss Amount for the
corresponding Collection Period until the Aggregate Principal Loss
Amount is reduced to zero;
o third, to reduce any Carryover Charge-Offs that have not been reduced
on prior payment dates until the Carryover Charge-Offs are reduced to
zero;
o fourth, pro rata any break costs to:
o the fixed-floating rate swap provider in respect of the
termination of any fixed-floating swap; and
76
o the currency swap provider in respect of the termination of a
currency swap where the currency swap provider is the defaulting
party, as such term is defined in the relevant currency swap;
o fifth, any fees payable to the seller; and
o sixth, the balance, if any, pro rata to each holder of a residual
income unit.
The issuer trustee shall only make a payment described in the bullet
points in this section to the extent that any Income remains from which to make
the payment after amounts with priority to that payment have been fully paid.
The aggregate amount of Income applied on a payment date under the second and
third bullet points above is called the RECOVERY AMOUNT for that payment date
and will be applied to make principal payments on the notes as described below
under "-- Principal Distributions."
INTEREST ON THE NOTES
CALCULATION OF INTEREST PAYABLE ON THE NOTES
Up to, and including, the Step-Up Margin Date, the interest rate for
each class of US$ notes for any Interest Period will be equal to LIBOR on the
related rate reset date plus a margin of 0.20% per annum in respect of the Class
A notes, a margin of 0.33% per annum in respect of the Class AB notes and a
margin of 0.63% per annum in respect of the Class B notes. If the issuer trustee
has not redeemed all of any class of the US$ notes by the Step-Up Margin Date
then the interest rate for any Interest Period commencing on or after that date
for such class of US$ notes will be equal to LIBOR on the related rate reset
date plus a margin of 0.40% per annum in respect of the Class A notes, a margin
of 0.66% per annum in respect of the Class AB notes and a margin of 1.26% per
annum in respect of the Class B notes.
The STEP-UP MARGIN DATE means the payment date falling in March 2009.
The interest rate for the Redraw notes will be as specified on the date
the Redraw notes are issued. No Redraw notes may be issued unless the rating
agencies have confirmed that the issue of the Redraw notes will not result in a
reduction or withdrawal of the rating of any note outstanding.
With respect to any payment date, interest on the notes will be
calculated as the product of:
o the outstanding Principal Amount of such class as of the first day of
the applicable Interest Period, after giving effect to any payments of
principal made or to be made with respect to such class on such day;
and
o the interest rate for such class of notes; and
o a fraction, the numerator of which is the actual number of days in the
applicable Interest Period and the denominator of which is 360 days
for the US$ notes, or 365 days for the Class A A$ Interest Amount, the
Class AB A$ Interest Amount, the Class B A$ Interest Amount and the
Redraw notes.
A note will bear interest until the date that note is finally redeemed.
See "-- Final Redemption of the Notes" below.
77
CALCULATION OF LIBOR
On the second banking day in London and New York before the beginning
of each Interest Period, the calculation agent will determine LIBOR for the next
Interest Period. This will be the rate reset date for LIBOR.
MORTGAGE PRINCIPAL REPAYMENTS
On each Determination Date, the trust manager must determine the
Mortgage Principal Repayments for the Collection Period ending immediately prior
to that Determination Date.
MORTGAGE PRINCIPAL REPAYMENTS for a Collection Period are all amounts
received by the issuer trustee during that Collection Period in connection with
a housing loan or mortgage securing that housing loan which are:
o in respect of the repayment of any part of the principal outstanding
under the housing loan;
o any net receipts of a principal or capital nature received in respect
of any enforcement or recovery proceedings in respect of the housing
loan or mortgage securing that housing loan;
o any net receipts of a principal or capital nature received under a
mortgage insurance policy or title insurance policy in respect of the
housing loan or mortgage securing that housing loan;
o any balance of the Prefunding Account on the first payment date after
the closing date which is to be treated as a Mortgage Principal
Repayment received by the issuer trustee during that Collection
Period;
o any other amount which, under the first bullet point under the heading
"-- Additional Income Payments", is to be treated as a Mortgage
Principal Repayment received by the issuer trustee during that
Collection Period; and
o any other amount received on, under or in relation to the housing loan
or mortgage securing that housing loan and which is not Income.
PRINCIPAL DISTRIBUTIONS
On each payment date prior to the enforcement of the security trust
deed, in accordance with the calculations, instructions and directions provided
to it by the trust manager and except to the extent the trust manager directs
the issuer trustee that such moneys be applied or retained for Liquidity
Purposes, as described below, the issuer trustee must distribute or cause to be
distributed out of the Mortgage Principal Repayments in relation to the
Collection Period ending immediately before that payment date, any Liquid
Authorized Investments and any Recovery Amount for the corresponding payment
date, the following amounts in the following order of priority:
o first, to make up any Income Shortfall. See "--Application of Mortgage
Principal Repayments and Liquid Authorized Investments to Available
Income" above;
78
o second, to replenish Liquid Authorized Investments (after giving
effect to the use of Liquid Authorized Investments to cure any Income
Shortfall pursuant to the bullet point above) until the value of
Liquid Authorized Investments equals the Prescribed Minimum Level;
o third, to Redraw noteholders in payment of the Principal Amount of the
Redraw notes until such time as the Redraw notes have been redeemed in
full;
o fourth:
o if the Threshold Requirements have been met on the payment date,
pro rata:
o (A) to pay to (1) prior to the termination of the Class A
currency swap, the currency swap provider the Class A A$
Equivalent of the Principal Amount of the Class A notes and
the reciprocal payment by the currency swap provider is
thereafter to be applied towards payment of the Principal
Amount of the Class A notes on that payment date or (2) if
the Class A currency swap has been terminated, the note
trustee for purchase of U.S. dollars at the spot exchange
rate to be applied in repaying principal on the Class A
notes on that payment date, in each case until such time as
all of the Class A notes have been redeemed in full;
o (B) to pay to (1) prior to the termination of the Class AB
currency swap, the currency swap provider the Class AB A$
Equivalent of the Principal Amount of the Class AB notes and
the reciprocal payment by the currency swap provider is
thereafter to be applied towards payment of the Principal
Amount of the Class AB notes on that payment date or (2) if
the Class AB currency swap has been terminated, the note
trustee for purchase of U.S. dollars at the spot exchange
rate to be applied in repaying principal on the Class AB
notes on that payment date, in each case until such time as
all of the Class AB notes have been redeemed in full; and
o (C) to pay to (1) prior to the termination of the Class B
currency swap, the currency swap provider the Class B A$
Equivalent of the Principal Amount of the Class B notes and
the reciprocal payment by the currency swap provider is
thereafter to be applied towards payment of the Principal
Amount of the Class B notes on that payment date or (2) if
the Class B currency swap has been terminated, the note
trustee for purchase of U.S. dollars at the spot exchange
rate to be applied in repaying principal on the Class B
notes on that payment date, in each case until such time as
all of the Class B notes have been redeemed in full,
provided that:
o (D) if the Threshold Requirements are satisfied on any
payment date prior to the third anniversary of the closing
date, the issuer trustee will pay on that payment date under
each of sub-paragraphs (B) and (C) above 50% of the amount
that would otherwise have been payable if not for this
sub-paragraph (D), and will pay the balance of the amount
otherwise so payable in accordance with sub-paragraph (A).
On or after the third anniversary of the closing date, if
the
79
Threshold Requirements are satisfied, the issuer trustee
will pay 100% of the amount payable under each of
sub-paragraphs (B) and (C) above; and
o (E) each such amount in sub-paragraphs (B) and (C) above
shall only be distributed to the extent that such
distribution will not result in a breach of the Threshold
Requirements; or
o if the Threshold Requirements have not been met on the payment
date, in the following order of priority:
o first:
o to pay to (1) prior to the termination of the Class A
currency swap, the currency swap provider the Class A
A$ Equivalent of the Principal Amount of the Class A
notes and the reciprocal payment by the currency swap
provider is thereafter to be applied towards payment of
the Principal Amount of the Class A notes on that
payment date or (2) if the Class A currency swap has
been terminated, the note trustee for purchase of U.S.
dollars at the spot exchange rate to be applied in
repaying principal on the Class A notes on that payment
date, in each case until such time as all Class A notes
have been redeemed in full; and
o second:
o to pay to (1) prior to the termination of the Class AB
currency swap, the currency swap provider the Class AB
A$ Equivalent of the principal amount of the Class AB
notes and the reciprocal payment by the currency swap
provider is thereafter to be applied towards payment of
the Principal Amount of the Class AB notes or (2) if
the Class AB currency swap has been terminated, the
note trustee for the purchase of U.S. dollars at the
exchange rate to be applied in repaying principal on
the Class AB notes on that payment date, in each case
until such time as all Class AB notes have been
redeemed in full;
o third:
o to pay to (1) prior to the termination of the Class B
currency swap, the currency swap provider the Class B
A$ Equivalent of the Principal Amount of the Class B
notes and the reciprocal payment by the currency swap
provider is thereafter to be applied towards payment of
the Principal Amount of the Class B notes or (2) if the
Class B currency swap has been terminated, the note
trustee for purchase of U.S. dollars at the exchange
rate to be applied in repaying principal on the Class B
notes on that payment date, in each case until such
time as all Class B notes have been redeemed in full;
and
o fifth, the balance as a distribution to the holder of the
residual capital unit as to A$10, and the remaining balance
pro rata to each holder of a residual income unit.
80
The issuer trustee, pursuant to the directions provided by the trust
manager, will only make a payment described in any of the preceding bullet
points above in this section to the extent that any Mortgage Principal
Repayments and Recovery Amounts remain from which to make the payment after
amounts with priority to that payment have been fully paid. The issuer trustee
will only use Liquid Authorized Investments in the third, fourth and fifth
bullet points above to the extent that the application of Liquid Authorized
Investments will not reduce the value of Liquid Authorized Investments to less
than the Prescribed Minimum Level.
The THRESHOLD REQUIREMENTS will be met, at any time, if each of the
following conditions are satisfied:
o there are no Carryover Charge-Offs at that time;
o no more than 5% of the housing loans (by unpaid principal balance) are
in arrears by an amount equal to two or more monthly payments at that
time;
o an amount equal to the aggregate of:
1. the Class AB A$ Equivalent of the Principal Amount of all Class
AB notes outstanding at that time; plus
2. the Class B A$ Equivalent of the Principal Amount of all Class B
notes outstanding at that time,
is not less than 0.25% of the amount equal to the aggregate of:
1. the Class A A$ Equivalent of the Initial Principal Amount of all
Class A notes; plus
2. the Class AB A$ Equivalent of the Initial Principal Amount of all
Class AB notes; plus
3. the Class B A$ Equivalent of the Initial Principal Amount of all
Class B notes; and
o an amount equal to the aggregate of:
1. the Class AB A$ Equivalent of the Principal Amount of all Class
AB notes outstanding at that time; plus
2. the Class B A$ Equivalent of the Principal Amount of all Class B
notes outstanding at that time,
is not less than 12.4% of the amount equal to the aggregate of:
1. the Class A A$ Equivalent of the Principal Amount of all Class A
notes outstanding at that time; plus
2. the Class AB A$ Equivalent of the Principal Amount of all Class
AB notes outstanding at that time; plus
3. the Class B A$ Equivalent of the Principal Amount of all Class B
notes outstanding at that time.
81
LIQUIDITY PURPOSES include:
o replenishing Liquid Authorized Investments to maintain the Prescribed
Minimum Level. See "--Application of Mortgage Principal Repayments and
Liquid Authorized Investments to Available Income";
o the provision by the issuer trustee of redraws in the manner described
under "Interstar Residential Loan Program -- Special Features of the
Housing Loans -- Redraws" above; and
o the provision by the issuer trustee of advances to borrowers under
housing loans which provide for a line of credit facility or revolving
credit facility.
CHARGE-OFFS
If, on any payment date, the Aggregate Principal Loss Amount for the
related Collection Period exceeds the amount allocated or available for
allocation on that payment date under the second bullet point under the heading
"-- Additional Income Payments", the amount of the excess will be the CHARGE-OFF
for that payment date. The trust manager will notify the issuer trustee and the
note trustee of the amount of any Charge-Offs for any payment date. The total of
the Charge-Offs from prior payment dates that have not been reduced from Income
as described above under "-- Additional Income Payments" are called CARRYOVER
CHARGE-OFFS.
PAYMENTS INTO US$ ACCOUNT
The principal paying agent shall open and maintain a US$ account into
which the currency swap provider shall deposit on each payment date amounts
denominated in US$. The issuer trustee shall direct the currency swap provider
to pay all amounts denominated in US$ payable to the issuer trustee by the
currency swap provider under the relevant currency swaps into the US$ account or
to the principal paying agent on behalf of the issuer trustee. If any of the
issuer trustee, the trust manager or the servicer receives any amount
denominated in US$ from the currency swap provider under the relevant currency
swaps, they will also promptly pay that amount to the credit of the US$ account.
PAYMENTS OUT OF US$ ACCOUNT
At the direction of the trust manager, the issuer trustee shall, or
shall require that the principal paying agent, on behalf of the issuer trustee,
distribute the following amounts from the US$ account in accordance with the
note trust deed and the agency agreement on each payment date pro rata between
the relevant notes of a class and to the extent payments relating to the
following amounts were made to the currency swap provider:
o interest on the Class A notes, the Class AB notes and the Class B
notes; and
o principal on the Class A notes, the Class AB notes and the Class B
notes, until their outstanding principal amount is reduced to zero.
82
NOTICES
Where the note trust deed provides for notice to US$ noteholders of any
event, such notice shall be sufficiently given, unless otherwise provided by law
or otherwise expressly stated in the note trust deed, for so long as the US$
notes are listed on the Australian Stock Exchange if published in a leading
newspaper having general circulation in Australia. This notice will be deemed to
be given on the date of the first publication.
Any notice to US$ noteholders specifying a payment date, an interest
rate, interest payable, a principal payment -- or the absence of a principal
payment -- and the Principal Amount of the US$ notes after giving effect to such
payment, will be deemed to have been properly given if the information contained
in the notice appears on the relevant page of the Reuters Screen or the
electronic information system made available to its subscribers by Bloomberg,
L.P. or any other similar electronic reporting service as may be approved by the
note trustee in writing and notified to US$ noteholders. This notice will be
considered to have been given on the first date on which it appears on the
relevant electronic reporting service. If it is impossible or impracticable to
give notice as stated in this paragraph, then notice of the matters discussed in
this paragraph will be given in the manner stated in the paragraph above.
FIXED-FLOATING RATE SWAPS
The issuer trustee will in the future enter into a swap governed by an
ISDA Master Agreement, as amended by a supplementary schedule and confirmed by a
written confirmation, with the fixed-floating rate swap provider, each time a
fixed-rate housing loan is added to the housing loan pool or if a borrower
converts a floating rate loan to a fixed rate loan, to hedge the basis risk
between the interest rate on the fixed rate housing loans and the floating rate
obligations of the trust, including the interest due on the notes. Such
fixed-floating rate swaps will cover the housing loans which bear a fixed rate
of interest as of the applicable cut-off date and those variable rate housing
loans which at a later date convert to a fixed rate of interest.
The issuer trustee will pay the fixed-floating rate swap provider on
each payment date an amount calculated by reference to the applicable fixed rate
on the housing loans which are subject to a fixed rate of interest. The issuer
trustee will also pay the fixed-floating rate swap provider all break fees from
borrowers with fixed rate loans received during the related Collection Period.
The issuer trustee will receive from the fixed-floating rate swap
provider on each payment date an amount calculated by reference to the Bank Bill
Rate.
The terms of each fixed-floating rate swap allow for netting of swap
payments for transactions under the one confirmation.
FIXED-FLOATING RATE SWAP DOWNGRADE
If the fixed-floating rate swap provider's rating falls below:
o a short term credit rating of A-1 by S&P or
o a long term credit rating of A2 or a short term credit rating of P-1
by Moody's,
the fixed-floating rate swap provider must:
83
o immediately, at its cost, novate its obligations to a replacement
fixed-floating rate swap provider with a short term credit rating of
at least A-1 by S&P and a long term credit rating of at least A2 and a
short term credit rating of P-1 by Moody's; and
o if the fixed-floating rate swaps are not novated to a replacement
fixed-floating rate swap provider within:
o 30 days, if the fixed-floating rate swap provider is downgraded
to less than a short term credit rating of A-1 by S&P or less
than a short term credit rating of P-1 by Moody's or not less
than a long term credit rating of A-3 by Moody's; or
o 5 business days, if the fixed-floating rate swap provider is
downgraded to less than a long term credit rating of A3 by
Moody's,
then the fixed-floating rate swap provider must cash collateralize its
obligations.
Where the fixed-floating rate swap provider must or elects to cash
collateralize its obligations, it will, at its own cost, deposit into a swap
collateral account sufficient funds to ensure that the amount standing to the
credit of that account is equal to the greater of the following -- unless
otherwise agreed by the rating agencies:
o an amount sufficient to maintain the rating of the notes at the rating
that was applicable to those notes immediately prior to the rating
downgrade of the fixed-floating rate swap provider;
o the amount of the next swap payment due by the fixed-floating rate
swap provider; and
o 1% of the aggregate Principal Amount of the notes-- or as applicable
the Australian dollar equivalent-- at that time.
TERMINATION BY THE FIXED-FLOATING RATE SWAP PROVIDER
The fixed-floating rate swap provider will have the right to terminate
a fixed-floating rate swap in the following circumstances:
o the issuer trustee fails to make a payment under the fixed-floating
rate swap within 10 business days after notice of failure is given to
the issuer trustee by the fixed-floating rate swap provider;
o if due to a change in law it becomes illegal for either party to make
or receive payments, perform its obligations or comply with any
material provision of the fixed-floating rate swap;
o an Insolvency Event has occurred with respect to the issuer trustee
and the issuer trustee has not novated its obligations within 30 days
of the Insolvency Event and such substitution will not have caused a
downgrade or withdrawal of the rating of the notes; or
o an event of default has occurred and the security trustee has
exercised its rights to enforce the charge under the security trust
deed.
84
The issuer trustee will have the right to terminate a fixed-floating
rate swap in the following circumstances:
o the fixed-floating rate swap provider fails to make a payment under
the fixed-floating rate swap within 10 business days after notice of
failure is given to the fixed-floating rate swap provider by the
issuer trustee;
o if due to a change in law it becomes illegal for either party to make
or receive payments, perform its obligations or comply with any
material provision of the fixed-floating rate swap; or
o an Insolvency Event has occurred with respect to the fixed-floating
rate swap provider.
THE CURRENCY SWAPS
Collections on the housing loans and payments to the issuer trustee
under any fixed-floating rate swaps will be denominated in Australian dollars.
The payments to the issuer trustee under any fixed-floating rate swaps will be
calculated by reference to the Bank Bill Rate. However, the payment obligations
of the issuer trustee on the US$ notes are denominated in U.S. dollars and the
US$ notes bear interest at a rate calculated by reference to LIBOR. The issuer
trustee will enter into the Class A currency swap to hedge its interest rate and
currency exposure in relation to the Class A notes, the Class AB currency swap
to hedge its interest rate and currency exposure in relation to the Class AB
notes and the Class B currency swap to hedge its interest rate and currency
exposure in relation to the Class B notes. These currency swaps are called the
US$ CURRENCY SWAPS and will be governed by the laws of England and Wales.
The US$ currency swaps will be governed by a standard form ISDA Master
Agreement, as amended by their respective supplementary schedules and confirmed
by separate written confirmations relating to the Class A notes, the Class AB
notes and the Class B notes, respectively.
Under the Class A currency swap, the Class AB currency swap and the
Class B currency swap, the issuer trustee will pay to the currency swap provider
on each payment date an amount in Australian dollars equal to the lesser of (1)
its pro rata share of the Mortgage Principal Repayments -- except to the extent
applied or retained for Liquidity Purposes -- any available Liquid Authorized
Investments and Recovery Amounts remaining after making the distributions to
make up any Income Shortfalls or to pay principal on the Redraw notes, if any --
see "-- Principal Distributions" above -- and (2) (a) the Class A A$ Equivalent
of the Principal Amount of the Class A notes, (b) the Class AB A$ Equivalent of
the Principal Amount of the Class AB notes, or (c) the Class B A$ Equivalent of
the Principal Amount of the Class B notes, as the case may be. The currency swap
provider will pay directly to the US$ account of the principal paying agent on
the related payment date an amount denominated in United States dollars which is
equivalent to such Australian dollar payment. Under the Class A currency swap,
the equivalent United States dollar payment will be calculated using an exchange
rate of US$0.7531=A$1.00. Under the Class AB currency swap, the equivalent
United States dollar payment will be calculated using an exchange rate of
US$0.7485=A$1.00. Under the Class B currency swap, the equivalent United States
dollar payment will be calculated using an exchange rate of US$0.7485=A$1.00.
These exchange rates will be fixed for the term of the US$ currency swaps.
85
In addition, under the Class A currency swap, the Class AB currency
swap and the Class B currency swap on each payment date the issuer trustee will
pay to the currency swap provider the Class A A$ Interest Amount, the Class AB
A$ Interest Amount and the Class B A$ Interest Amount, respectively, for that
payment date. The currency swap provider will pay directly to the US$ account of
the principal paying agent on the related payment date an amount equal to the
interest payable in US$ to the US$ noteholders. The currency swap provider will
be required to gross-up payments to the principal paying agent in respect of any
withholding taxes levied on payments by it under a US$ currency swap. However,
the issuer trustee will not be required to pay grossed-up amounts to the
currency swap provider under a US$ currency swap.
If on any payment date the issuer trustee does not or is unable to make
the full floating rate payment under a currency swap, the US$ floating rate
payment to be made by the currency swap provider with respect to such Australian
dollar floating rate payment will be reduced by the same proportion as the
reduction in such payment from the issuer trustee.
The purchase price for the US$ notes will be paid by investors in U.S.
dollars, but the consideration for the purchase by the issuer trustee of an
equitable interest in the housing loans will be in Australian dollars. On the
closing date, the issuer trustee will pay to the currency swap provider the
proceeds of the issue of the US$ notes in U.S. dollars. In return the issuer
trustee will be paid by the currency swap provider the Class A A$ Equivalent,
the Class AB A$ Equivalent and the Class B A$ Equivalent, as applicable, of that
U.S. dollar amount.
TERMINATION BY THE CURRENCY SWAP PROVIDER
With respect to each of the Class A currency swap, the Class AB
currency swap and the Class B currency swap, the currency swap provider shall
have the right to terminate such currency swap in the following circumstances:
o if the issuer trustee fails to make a payment under the relevant
currency swap within ten business days of its due date;
o an Insolvency Event with respect to the issuer trustee occurs or the
issuer trustee merges into another entity without that entity properly
assuming responsibility for the obligations of the issuer trustee
under the relevant currency swap;
o if due to a change in law it becomes illegal for either party to make
or receive payments or comply with any other material provision of the
relevant currency swap. Each of the currency swaps requires such party
to make efforts to transfer its rights and obligations to another
office or another affiliate to avoid this illegality, so long as the
transfer would not result in a downgrade or withdrawal of the rating
of the notes. If those efforts are not successful, then the currency
swap provider will have the right to terminate the relevant currency
swap. These provisions relating to termination following an illegality
have been modified so that they are not triggered by the introduction
of certain exchange controls by any Australian government body; or
o an event of default has occurred and the security trustee has
exercised its rights to enforce the charge under the security trust
deed.
86
TERMINATION BY THE ISSUER TRUSTEE
There are a number of circumstances in which the issuer trustee has the
right to terminate the Class A currency swap, the Class AB currency swap or the
Class B currency swap. In each of these cases and with respect to each of the
currency swaps it is only permitted to exercise that right with the prior
written consent of the note trustee:
o where the currency swap provider fails to make a payment under the
relevant currency swap within ten business days of its due date or the
currency swap provider becomes insolvent or merges into another entity
without that entity properly assuming responsibility for the
obligations of the currency swap provider under such currency swap;
o if due to a change in law it becomes illegal for either party to make
or receive payments or comply with any other material provision of the
relevant currency swap. Each of the currency swaps requires such party
to make efforts to transfer its rights and obligations to another
office or another affiliate to avoid this illegality, so long as the
transfer would not result in a downgrade or withdrawal of the rating
of the notes. If those efforts are not successful, then the issuer
trustee will have the right to terminate. These provisions relating to
termination following an illegality have been modified so that they
are not triggered by the introduction of certain exchange controls by
any Australian government body;
o if the issuer trustee becomes obligated to make a withholding or
deduction in respect of the notes or in respect of payments under the
relevant currency swap or borrowers under the housing loans become
obliged to make a withholding or deduction in respect of payments
under the housing loans and the notes are redeemed as a result. See
"-- Redemption of Notes for Taxation or Other Reasons" below; or
o the currency swap provider breaches its obligation to deposit cash
collateral with the issuer trustee or to transfer the currency swap to
a replacement currency swap provider or to enter into another
arrangement required by the rating agencies in accordance with the
relevant currency swap.
The issuer trustee may only terminate a relevant currency swap with the
prior written consent of the note trustee. Each party may terminate a relevant
currency swap only after consulting with the other party as to the timing of the
termination. The issuer trustee will exercise such right to terminate at the
direction of the trust manager.
CURRENCY SWAP DOWNGRADE
If, as a result of the withdrawal or downgrade of its credit rating by
any rating agency, the currency swap provider does not have a short term credit
rating of A-1+ by S&P and a long term credit rating of at least A2 and a short
term credit rating of at least P-1 by Moody's the currency swap provider must
within:
o 30 days of a downgrade of the currency swap provider's short term
credit rating by S&P to not lower than A-1 or the downgrade of its
short term credit rating by Moody's to lower than P-1 or the downgrade
of its long term credit rating by Moody's to not lower than A3; or
o 5 business days of any other such withdrawal or downgrade:
87
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 transfer to the issuer trustee such amount of cash and/or securities
as agreed in the credit support documentation in a form and substance
approved by each rating agency
o procure a novation of the rights and obligations of the currency swap
provider under the currency swaps to one or more replacement currency
swap providers each with a credit rating not less than A-1+ (short
term) from S&P and A2 (long term) and P-1 (short term) from Moody's;
o procure another person with a credit rating not less than A-1+ (short
term) from S&P and A2 (long term) and P-1 (short term) from Moody's to
become a co-obligor in respect of its obligations under the currency
swaps; or
o enter into such other arrangements which each rating agency has
confirmed will result in there not being a withdrawal or downgrade of
the then current credit ratings assigned by it to the notes.
If, at any time, the currency swap provider's obligations under the
Class A currency swap, the Class AB currency swap or the Class B currency swap
are novated or the currency swap provider is otherwise replaced as currency swap
provider, the currency swap provider shall be immediately entitled to any cash
and/or securities which it has transferred to the issuer trustee pursuant to
such currency swap and related credit support documentation.
TERMINATION PAYMENTS
On the date of termination of the Class A currency swap, the Class AB
currency swap or the Class B currency swap, a termination payment will be due
from the issuer trustee to the currency swap provider or from the currency swap
provider to the issuer trustee. The termination of a currency swap where a
replacement currency swap, on terms that will not lead to a withdrawal or
downgrade of the then current rating assigned by either rating agency to the
notes, is not put in place, is an event of default under the security trust
deed.
The termination payment in respect of a currency swap will be
determined on the basis of quotations from four leading dealers in the relevant
market selected by the currency swap provider to enter into a replacement
transaction that would have the effect of preserving the economic equivalent of
any payment that would, but for the early termination, have been required under
the terms of the relevant currency swap.
REPLACEMENT OF A CURRENCY SWAP
If the Class A currency swap, the Class AB currency swap or the Class B
currency swap is terminated, the issuer trustee must, at the direction of the
trust manager, enter into one or more replacement currency swaps which replace
such currency swap, but only on the condition that:
o the termination payment, if any, which is payable by the issuer
trustee to the currency swap provider on termination of the currency
swap will be paid in full when due in accordance with the series
notice and such currency swap;
o the then current ratings assigned to the notes by either rating agency
will not be withdrawn or downgraded; and
88
o the liability of the issuer trustee under that replacement currency
swap is limited to at least the same extent that its liability is
limited under the currency swap.
If the preceding conditions are satisfied, the issuer trustee must, at
the direction of the trust manager, enter into a replacement currency swap, and
if it does so it must direct the provider of the replacement currency swap to
pay any up-front premium to enter into the replacement currency swap due to the
issuer trustee directly to the currency swap provider in satisfaction of and to
the extent of the issuer trustee's obligation to pay the termination payment to
the currency swap provider. To the extent that such premium is not greater than
or equal to the termination payment, the balance must be paid by the issuer
trustee as an expense of the trust.
CURRENCY SWAP PROVIDER
The currency swap provider will be Barclays Bank PLC.
The short term unsecured obligations of Barclays Bank PLC are rated
A-1+ by S&P, P-1 by Moody's and F1+ by Fitch Ratings Limited and the long term
obligations of Barclays Bank PLC are rated Aa1 by Moody's, AA by S&P and AA+ by
Fitch Ratings Limited.
The annual report on Form 20-F for the year ended December 31, 2002 of
Barclays PLC and Barclays Bank PLC is on file with the Securities and Exchange
Commission. Barclays Bank PLC will provide without charge to each person to whom
this prospectus is delivered, on the request of that person, a copy of the Form
20-F referred to in the previous sentence. Written requests should be directed
to Barclays Bank PLC, 54 Lombard Street, London, EC3P 3AH, England, Attention:
Barclays Group Corporate Secretariat.
SWAP COLLATERAL ACCOUNT
If a swap provider provides cash collateral to the issuer trustee:
o the trust manager must direct the issuer trustee, and the issuer
trustee must, as soon as practicable, establish and maintain in the
name of the issuer trustee a swap collateral account with an Approved
Bank such that the deposit does not cause a downgrade or withdrawal of
the rating of any notes; and
o the swap provider must deposit the cash collateral in the swap
collateral account.
The issuer trustee may only make withdrawals from a collateral account
upon the direction of the trust manager and only for the purpose of:
o entering into a substitute swap;
o refunding to that swap provider the amount of any reduction in the
swap collateral amount, but only if the ratings of the notes are not
thereby withdrawn or reduced;
o withdrawing any amount which has been incorrectly deposited into the
swap collateral account;
o paying bank accounts debit tax or equivalent taxes payable in respect
of the swap collateral account; or
89
o funding the amount of any payment due to be made by that swap provider
under the relevant swap following the failure by that swap provider to
make that payment.
WITHHOLDING OR TAX DEDUCTIONS
All payments in respect of the notes will be made without withholding
or tax deduction for, or on account of, any present or future taxes, duties or
charges of whatever nature unless the issuer trustee or any paying agent is
required by applicable law to make any such payment in respect of the notes
subject to any withholding or deduction for, or on account of, any present or
future taxes, duties or charges of whatsoever nature. In the event that the
issuer trustee or the paying agents, as the case may be, shall make such payment
after such withholding or deduction has been made, it shall account to the
relevant authorities for the amount so required to be withheld or deducted.
Neither the issuer trustee nor any paying agent will be obligated to make any
additional payments to holders of the notes with respect to that withholding or
deduction.
REDEMPTION OF THE NOTES FOR TAXATION OR OTHER REASONS
AT THE OPTION OF NOTEHOLDERS
If the trust manager satisfies the issuer trustee and the note trustee,
immediately prior to giving the notice to the noteholders as described in this
section, that:
o on the next payment date the issuer trustee or any paying agent would
be required to deduct or withhold from any payment:
o of principal or interest in respect of the notes; or
o by the issuer trustee to the currency swap provider under a
currency swap, or
o any amount for or on account of any present or future taxes,
duties, assessments or governmental charges of whatever nature
imposed, levied, collected, withheld or assessed by any
government agency, or
o a government agency requires the deduction or withholding from
payments by borrowers under the housing loans of any amount for or on
account of any taxes, duties, assessments or governmental charges of
whatever nature imposed, levied, collected, withheld or assessed by
that government agency,
then the issuer trustee must, when so directed by noteholders representing at
least 75% of the outstanding Principal Amount of the notes provided that the
issuer trustee will be in a position on the next payment date to discharge, and
the trust manager will so certify to the issuer trustee and the note trustee,
all its liabilities in respect of the notes and any amounts required under the
security trust deed to be paid in priority to or equal with the notes, redeem
all, but not some, of the notes at their outstanding Principal Amount, together
with accrued interest to the date of redemption on any subsequent payment date.
Noteholders must be given notice of a redemption not more than 60 nor less than
45 days prior to the date of redemption.
90
AT THE OPTION OF THE TRUST MANAGER
If the trust manager satisfies the issuer trustee and the note trustee,
immediately prior to giving the notice to the noteholders as described in this
section, that on the next payment date the currency swap provider would be
required to deduct or withhold from any payment under a currency swap any amount
for or on account of any present or future taxes, duties, assessments or
governmental charges of whatever nature imposed, levied, collected, withheld or
assessed by any government agency, then the issuer trustee must, when so
directed by the trust manager, in its sole discretion, provided that the issuer
trustee will be in a position on such payment date to discharge and the trust
manager will so certify to the issuer trustee and the note trustee, all its
liabilities in respect of the notes and any amounts required under the security
trust deed to be paid in priority to or equal with the notes, redeem all, but
not some, of the notes at their outstanding Principal Amount, together with
accrued interest to the date of redemption on any subsequent payment date.
Noteholders must be given notice of a redemption not more than 60 nor less than
45 days prior to the date of redemption.
REDEMPTION OF THE NOTES UPON AN EVENT OF DEFAULT
If an event of default occurs under the security trust deed while the
notes are outstanding, the security trustee may, subject in some circumstances
to the prior written consent of the Noteholder Mortgagees in accordance with the
provisions of the security trust deed, and will, if so directed by the
Noteholder Mortgagees where they are the only Voting Mortgagees, or, otherwise
by a resolution of 75% of the Voting Mortgagees, enforce the security created by
the security trust deed. That enforcement can include the sale of some or all of
the housing loans. If the trust terminates while notes are outstanding, the
seller has a right of first refusal to acquire the housing loans. Any proceeds
from the enforcement of the security will be applied in accordance with the
order of priority of payments as set out in the security trust deed. See
"Description of the Transaction Documents -- The Security Trust Deed".
OPTIONAL REDEMPTION OF THE NOTES
ON STEP-UP MARGIN DATE
At the trust manager's direction, to be given not later than four
business days before the relevant payment date, the issuer trustee must redeem
all of the notes in a class by repaying the outstanding Principal Amount of the
notes in that class, together with accrued interest to, but excluding, the date
of redemption, on any payment date falling on or after the Step-Up Margin Date,
being the March 2009 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;
91
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;
o in no circumstance may the trust manager give such a direction in
relation to Class AB noteholders or Class B noteholders unless:
o there are at that time no Redraw notes or Class A notes
outstanding; or
o the trust manager at the same time gives or has given a direction
to redeem the Redraw notes and the Class A notes; and
o in no circumstances may the trust manager give such a direction in
relation to Class B noteholders unless:
o there are at that time no Class AB notes outstanding; or
o the trust manager at the same time gives or has given a direction
to redeem the Class AB notes.
WHEN 10% OF NOTES OUTSTANDING
If the total outstanding Principal Amount of all notes in all classes
does not exceed 10% of the Initial Principal Amount of all notes the issuer
trustee must, if so directed in writing by the trust manager, repay the whole of
the Principal Amount of all notes together with any outstanding interest in
relation to those notes on the next payment date provided that:
o the trust manager has provided to:
o each noteholder, in accordance with the notice provisions set
forth under the heading "-- Notices", the note trustee and the
issuer trustee, 30 days prior notice; and
o each rating agency, 30 days prior written notice,
of the trust manager's intention to direct the issuer trustee to
redeem the notes;
o the issuer trustee has sufficient cash to make such repayment, in
respect of which the issuer trustee may rely conclusively on a
certification from the trust manager;
o the issuer trustee retains such amount as the trust manager or the
issuer trustee reasonably determines will be necessary to satisfy any
outstanding or anticipated expenses of the trust or payment to any
swap provider; and
o the repayment of principal on the notes is made in the order of
priority described under "-- Principal Distributions" above.
92
FINAL MATURITY DATE
The issuer trustee must pay the Principal Amount in relation to each
note on or by the final maturity date relating to that note. The failure of the
issuer trustee to pay the Principal Amount within ten business days of the final
maturity date, or within any other applicable grace period agreed upon with the
Mortgagees, will be an event of default under the security trust deed. The final
maturity date for the notes is the payment date falling in March 2036.
FINAL REDEMPTION OF THE NOTES
Each note will be finally redeemed, and the obligations of the issuer
trustee with respect to the payment of the Principal Amount of that note will be
finally discharged, upon the first to occur of:
o the date on which the Principal Amount of the note is reduced to zero;
o the date upon which the relevant noteholder renounces in writing all
of its rights to any amounts payable under or in respect of that note;
o the date on which all amounts received by the note trustee with
respect to the enforcement of the security trust deed are paid to the
principal paying agent;
o the payment date immediately following the date on which the issuer
trustee completes a sale and realization of all of the assets of the
trust in accordance with the master trust deed and the series notice;
o the date on which all of the principal of the notes is repaid in
accordance with "--Principal Distributions" described above;
o the date on which the notes are redeemed for taxation or other
reasons; and
o the date on which optional redemption of the notes is exercised.
TERMINATION OF THE TRUST
TERMINATION EVENTS
The trust shall continue until, and shall terminate on the later of:
o the Termination Date; and
o the date on which the assets of the trust have been sold or realized,
which shall be within 180 days after the Termination Date so far as
reasonably practicable and reasonably commercially viable.
93
REALIZATION OF TRUST ASSETS
On the Termination Date, subject to the seller's right of first
refusal, the issuer trustee must sell and realize the assets of the trust within
180 days. During the 180-day period, performing housing loans may not be sold
for less than their Unpaid Balance, and non-performing housing loans may not be
sold for less than the fair market value of such housing loans and their related
security, as agreed upon by the issuer trustee, based on appropriate expert
advice, and the seller; provided that the issuer trustee may not sell any
performing housing loan within the 180-day period for less than its fair market
value without the consent of the holders of 75% of the aggregate outstanding
Principal Amount of the notes. The trust manager will determine whether a
housing loan is performing or non-performing.
SELLER'S RIGHT OF FIRST REFUSAL
As soon as practical after the Termination Date, the trust manager will
direct the issuer trustee to offer to assign to the seller, its entire right,
title and interest in and to the housing loans sold by it for their Unpaid
Balance, for performing housing loans, and their fair market value, for
non-performing housing loans; provided that, if the fair market value of a
housing loan is less than its Unpaid Balance, the sale requires the consent of
the holders of 75% of the aggregate outstanding Principal Amount of the notes.
The issuer trustee is not entitled to sell any housing loans unless the
seller has failed to accept the offer made to it within 180 days after the
occurrence of the Termination Date by paying to the issuer trustee the purchase
price.
DISTRIBUTION OF PROCEEDS FROM REALIZATION OF TRUST ASSETS
After deducting expenses, the trust manager shall direct the issuer
trustee to distribute the proceeds of realization of the assets of the trust in
accordance with the cashflow allocation methodology set out in "-- Distribution
of Available Income", "-- Additional Income Payments" and "-- Principal
Distributions", and in accordance with any directions given to it by the trust
manager. If all of the notes have been fully redeemed and the trust's other
creditors have been paid in full, the issuer trustee shall distribute the assets
of the trust to the residual beneficiary.
PRESCRIPTION
A US$ note will be void in its entirety if not surrendered for payment
within ten years of the relevant date in respect of any payment on the note, the
effect of which would be to reduce the principal amount of such note to zero.
The relevant date is the date on which a payment first becomes due but, if the
full amount of the money payable has not been received in New York City by the
principal paying agent or the note trustee on or prior to that date, it means
the date on which the full amount of such money having been so received and
notice to that effect is duly given in accordance with the terms of the relevant
note. After the date on which a US$ note becomes void in its entirety, no claim
may be made in respect of it.
94
REPORTS TO NOTEHOLDERS
On each payment date, the trust manager will, in respect of the
Collection Period ending before that payment date, deliver to the principal
paying agent and the note trustee a noteholders' report containing the following
information:
o the aggregate Principal Amount of each class of notes as at the first
day after the payment date occurring during that Collection Period;
o the aggregate amount of interest payable on each class of notes on the
corresponding payment date, if any;
o the aggregate of all principal payments to be made in respect of each
class of notes on the corresponding payment date, if any;
o the Income for the Collection Period;
o the Mortgage Principal Repayments for the Collection Period;
o the expenses of the trust for the Collection Period;
o the aggregate of all redraws on the housing loans made during the
Collection Period;
o the interest rate for each class of notes for the Interest Period
ending on the day before the next payment date;
o the scheduled and unscheduled payments of principal on the housing
loans during the Collection Period;
o the Aggregate Principal Loss Amounts, if any, for the Collection
Period;
o the aggregate of the outstanding balances of the housing loans as at
the last day of the Collection Period;
o the Charge-Off and Carryover Charge-Offs, if any, for the
corresponding payment date;
o the Recovery Amount for the corresponding payment date, if any; and
o delinquency and loss statistics with respect to the housing loans
during the Collection Period.
Unless and until definitive US$ notes are issued, beneficial owners
will receive noteholders' reports and other information provided for under the
transaction documents only if, when and to the extent provided by DTC and its
participating organizations.
Unless and until definitive US$ notes are issued, quarterly and annual
unaudited reports containing information concerning the trust and the US$ notes
will be prepared by the trust manager and sent to DTC. DTC and its participants
will make such reports available to holders of interests in the US$ notes in
accordance with the rules, regulations and procedures creating and affecting
DTC. However, such reports will not be sent directly to each beneficial owner
while the US$ notes are in book-entry form. Upon the issuance of fully
registered, definitive notes, such
95
reports will be sent directly to each US$ noteholder. Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The trust manager will file with the SEC such reports as
are required under the Exchange Act, and the rules and regulations of the SEC
thereunder. However, in accordance with the Exchange Act and the rules and
regulations of the SEC thereunder, the trust manager expects that the obligation
to file such reports will be terminated following the end of June 2005.
VOTING AND CONSENT OF NOTEHOLDERS
The note trustee is not bound to:
o vote under the security trust deed;
o direct the security trustee to enforce the security under the security
trust deed; or
o otherwise take any proceedings, actions or steps pursuant to or in
connection with the security trust deed, the note trust deed or the
US$ notes,
unless the note trustee is directed or requested to do so by
noteholders of at least 75% of the outstanding Principal Amount of the
US$ notes, and then, only if the note trustee is indemnified to its
satisfaction in accordance with the note trust deed.
96
DESCRIPTION OF THE TRANSACTION DOCUMENTS
The following summary, together with the information above under the
heading "Description of the US$ Notes", describes the material terms of the
master trust deed, the series notice, the note trust deed, the security trust
deed, the agency agreement, the investment management agreement and the backup
servicer agreement, collectively called the TRANSACTION DOCUMENTS. The summary
does not purport to be complete and is subject to the provisions of the
transaction documents. All of the transaction documents, except for the note
trust deed and the backup servicer agreement are governed by the laws of the
State of New South Wales, Australia. The note trust deed is governed by the laws
of the State of New South Wales, Australia and the administration of the trust
is governed by New York law. The backup servicer agreement is governed by the
laws of the State of Victoria, Australia. A copy of the master trust deed and
the investment management agreement and a form of each of the other transaction
documents have been filed as exhibits to the registration statement of which
this prospectus is a part.
TRUST ACCOUNTS
The issuer trustee will establish and maintain the collection account
with an Approved Bank. The collection account will initially be established with
National Australia Bank Limited, which has a short term rating of P-1 from
Moody's and A-1+ from S&P. The bank account shall be opened by the issuer
trustee in its name and in its capacity as trustee of the trust. This account
will not be used for any purpose other than for the trust.
The trust manager shall have the discretion and duty to recommend to
the issuer trustee, in writing, the manner in which any moneys forming part of
the trust shall be invested in Authorized Investments and what purchases, sales,
transfers, exchanges, collections, realizations or alterations of assets of the
trust shall be effected and when and how the same should be effected.
MODIFICATIONS
The issuer trustee, the trust manager and the servicer, with respect to
the master trust deed, the series notice and the investment management
agreement, after giving notice to the rating agencies, or the note trustee, the
trust manager and the issuer trustee with respect to the note trust deed or any
other transaction document, may by way of supplemental deed alter, add to or
modify the master trust deed, the series notice, the note trust deed or any
other transaction document so long as such alteration, addition or modification
was effected upon -- in the case of the master trust deed or the series notice
- -- the consent of the noteholders or residual beneficiary or -- in the case of
the note trust deed -- the consent of the US$ noteholders as described in the
following paragraph or is:
o to correct a manifest error or ambiguity or is of a formal, technical
or administrative nature only;
o necessary to comply with the provisions of any law or regulation or
with the requirements of any Australian governmental agency;
o appropriate or expedient as a consequence of an amendment to any law
or regulation or altered requirements of the government of any
jurisdiction, any department, commission, office of any government or
any corporation or controlled by any government, including, without
limitation, an addition or modification which is appropriate or
expedient as consequence of the enactment of a statute or regulation
97
or an amendment any statute or regulation or ruling by the Australian
Commissioner or 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 of the Interstar Millennium Trusts;
o in the case of the master trust deed only, in the opinion of the
issuer trustee, desirable to enable the provisions of the master trust
deed to be more conveniently, advantageously, profitably or
economically administered or is otherwise desirable for any reason.
Except for an alteration, addition or modification as described in the
preceding section, where, in the opinion of the issuer trustee -- in the case of
the master trust deed or the series notice -- or the note trustee -- in the case
of the note trust deed -- a proposed alteration, addition or modification to the
master trust deed, the series notice or the note trust deed is prejudicial or
likely to be prejudicial to the interests of the noteholders or a class of
noteholders or the residual beneficiary, such alteration, addition or
modification may only be effected with the prior consent of the holders of at
least 75% of the aggregate outstanding Principal Amount of the relevant class or
classes of notes or with the prior written consent of the residual beneficiary,
as the case may be.
THE ISSUER TRUSTEE
The issuer trustee is appointed as trustee of the trust on the terms
set out in the master trust deed and the series notice. The issuer trustee has
all the rights, powers and discretions over and in respect of the assets of the
trust in accordance with the transaction documents, any fixed floating rate swap
and the currency swaps.
The issuer trustee must act honestly and in good faith in performance
of its duties and in exercising its discretions under the master trust deed, use
its best endeavors to carry on and conduct its business in so far as it relates
to the master trust deed in a proper and efficient manner and to exercise such
diligence and prudence as a prudent person of business would exercise in
performing its express functions and in exercising its discretions under the
master trust deed.
DELEGATION
In exercising its powers and performing its obligations and duties
under the master trust deed, the issuer trustee may, with the approval of the
trust manager, delegate any or all of the duties, powers, discretion or other
functions of the issuer trustee.
TRUST INDENTURE ACT OF 1939
Under the note trust deed, the issuer trustee, or the trust manager on
its behalf, must deliver to the note trustee, within 120 days after the end of
each fiscal year of the trust, commencing on September 30, 2004, and otherwise
in compliance with the requirements of section 314(a)(4) of the United States
Trust Indenture Act of 1939, as amended, a certificate stating that:
o a review of the activities of the issuer trustee in respect of the
trust during such year and of performance under the transaction
documents, any fixed floating rate swap and the currency swaps, has
been made under supervision of the person signing the certificate; and
98
o to the best of the knowledge of the person signing the certificate,
based on the review referred to in the above bullet point, the issuer
trustee has complied with all conditions and covenants under the
transaction documents, any fixed floating rate swap and the currency
swaps, throughout the relevant year, or, if there has been a default
in the compliance of any such condition or covenant, specifying each
such default known to that person of the nature and status of the
default.
The issuer trustee, or the trust manager, on its behalf, must deliver
to the note trustee on the closing date, an opinion stating that the security
trust deed and any other requisite documents have been properly recorded and
filed. Within 120 days after the end of each fiscal year commencing on September
30, 2005, the issuer trustee, or the trust manager, on its behalf, must deliver
an opinion stating that action has been taken with respect to the recording and
filing of the security trust deed and any other requisite document or that no
action is required to maintain the security interest created by the security
trust deed.
ISSUER TRUSTEE AND SECURITY TRUSTEE FEES AND EXPENSES
The issuer trustee, the security trustee and the trust manager are
collectively entitled to a fee for each Collection Period equal to 0.1% per
annum of the aggregate outstanding Principal Amount of the notes on the first
day of each Collection Period payable in arrears on the next payment date.
Each of the issuer trustee and the security trustee will be indemnified
out of the assets of the trust for any liability, cost or expense incurred by it
in its capacity as issuer trustee or security trustee, as applicable, except to
the extent that such liability, cost or expense is caused by the fraud,
negligence or willful default of the issuer trustee or security trustee, as
applicable.
REMOVAL OF THE ISSUER TRUSTEE
The issuer trustee is required to retire as trustee after a direction
from the trust manager in writing following an Issuer Trustee's Default.
If the issuer trustee does not retire within 30 days of being directed
by the trust manager to do so, the trust manager shall have the right to remove
the issuer trustee from office as trustee of the Interstar Millennium Trusts.
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.
99
Before retirement, the issuer trustee must appoint a successor trustee
who is approved by the trust manager, or who may be the trust manager, and whose
appointment will not materially prejudice the interests of noteholders. If a
successor trustee has not been appointed by the end of the three months' notice
period, the trust manager shall act as trustee until a successor trustee is
appointed.
LIMITATION OF THE ISSUER TRUSTEE'S LIABILITY
The issuer trustee enters into the transaction documents, any
fixed-floating rate swap and the currency swaps, and issues the notes only in
its capacity as trustee of the trust and in no other capacity. A liability
incurred by the issuer trustee acting in its capacity as trustee of the trust
arising under or in connection with the transaction documents, any
fixed-floating rate swap and the currency swaps, or the trust or in respect of
the notes is limited to and can be enforced against the issuer trustee only to
the extent to which it can be satisfied out of the assets of the trust out of
which the issuer trustee is actually indemnified for the liability. This
limitation of the issuer trustee's liability applies despite any other provision
of the transaction documents, any fixed-floating rate swap and the currency
swaps, and extends to all liabilities and obligations of the issuer trustee in
any way connected with any representation, warranty, conduct, omission,
agreement or transaction related to the transaction documents, any
fixed-floating rate swap and the currency swaps, or the trust.
No noteholder nor any party to any transaction document, any
fixed-floating rate swap and the currency swaps, may sue the issuer trustee in
any capacity other than as trustee of the trust or seek the appointment of a
receiver, liquidator, administrator or similar person to the issuer trustee --
except in relation to the assets of the trust -- or prove in any liquidation,
administration or arrangements of or affecting the issuer trustee -- except in
relation to the assets of the trust.
The other paragraphs in this section do not apply to any obligation or
liability of the issuer trustee to the extent that it is not satisfied because
under a transaction document, any fixed-floating rate swap and the currency
swaps, or by operation of law there is a reduction in the extent of the issuer
trustee's indemnification out of the assets of the trust as a result of the
issuer trustee's fraud, negligence, or wilful default.
Each of the trust manager, the servicer, the calculation agent, the
paying agents and the swap providers are responsible under the transaction
documents for performing a variety of obligations relating to the trust. No act
or omission of the issuer trustee, including any related failure to satisfy its
obligations or breach of representation or warranty under the transaction
documents, any fixed-floating rate swap and the currency swaps, will be
considered fraud, negligence or wilful default of the issuer trustee to the
extent to which the act or omission was caused or contributed to by any failure
by such person -- other than a person whose acts or omissions the issuer trustee
is liable for in accordance with the transaction documents, any fixed-floating
rate swap and the currency swaps -- to fulfil its obligations relating to the
trust or by any other act or omission of any such person -- other than a person
whose acts or omissions the issuer trustee is liable for in accordance with the
transaction documents, any fixed-floating rate swap and a currency swap --
regardless of whether or not that act or omission is purported to be done on
behalf of the issuer trustee.
100
No attorney, agent, receiver or receiver and trust manager appointed in
accordance with a transaction document has authority to act on behalf of the
issuer trustee in a way which exposes the issuer trustee to any personal
liability and no act or omission of any such person will be considered fraud,
negligence or wilful default of the issuer trustee provided, in the case of any
person selected and appointed by the issuer trustee, that the issuer trustee has
exercised reasonable care in the selection of such persons.
RIGHTS OF INDEMNITY OF ISSUER TRUSTEE
The issuer trustee will be indemnified out of the assets of the trust
against all losses and liabilities properly incurred by the issuer trustee in
performing its duties or exercising its powers under the transaction documents,
any fixed-floating rate swap and the currency swaps in relation to the trust
except to the extent that such losses and liabilities arose as a result of the
issuer trustee's fraud, negligence or wilful default.
The issuer trustee is indemnified out of the assets of the trust
against certain payments it may be liable to make under any Consumer Credit
Legislation. The trust manager also indemnifies the issuer trustee in relation
to such payments and the issuer trustee is required to first call on the
indemnity from the trust manager before calling on the indemnity from the assets
of the trust.
THE TRUST MANAGER
POWERS
The trust manager will have full and complete powers of management of
the trust, including the administration and servicing of the assets which are
not serviced by the servicer, borrowings and other liabilities of the trust and
the conduct of the day to day operation of the trust.
The issuer trustee has no duty to supervise the trust manager in the
performance of its functions and duties, or the exercise of its discretions.
The trust manager has the absolute discretion to recommend Authorized
Investments to the issuer trustee and direct the issuer trustee in relation to
those Authorized Investments.
DELEGATION
The trust manager may, in carrying out and performing its duties and
obligations contained in the master trust deed, delegate to any of the trust
manager's associates officers, or employees all acts, matters and things,
whether or not requiring or involving the trust manager's judgment or
discretion, or appoint any person to be its attorney, agent, delegate or sub
contractor for such purposes and with such powers as the trust manager thinks
fit.
Notwithstanding any such delegation or appointment, Interstar
Securitisation Management Pty Limited will continue to be liable for the acts
and omissions of any such associates, officers, employees, attorneys, agents,
delegates or subcontractors in respect of the performance of the trust manager's
obligations under and in connection with the transaction documents, any
fixed-floating rate swap and the currency swaps.
101
TRUST MANAGER'S FEES, EXPENSES AND INDEMNIFICATION
The trust manager is entitled to a fee for each Collection Period, see
"The Issuer Trustee -- Issuer Trustee and Security Trustee Fees and Expenses" --
on the first day of each Collection Period payable in arrears on the next
payment date.
The trust manager will be indemnified out of the assets of the trust
for any liability, cost or expense properly incurred by it in its capacity as
trust manager of the trust except to the extent that such liability, cost or
expense is caused by the fraud, negligence or wilful default of the trust
manager.
REMOVAL OR RETIREMENT OF THE TRUST MANAGER
The trust manager shall retire as trust manager if the issuer trustee
so directs in writing following a Trust Manager's Default.
The trust manager may resign on giving to the issuer trustee, with a
copy to each rating agency, not less than 90 days, or another period as the
trust manager and the issuer trustee may agree, notice in writing of its
intention to do so.
On retirement or removal of the trust manager, the issuer trustee may
appoint another trust manager, or may act as trust manager, on such terms as the
issuer trustee sees fit, provided the appointment will not materially prejudice
the interests of noteholders. Until a replacement trust manager is appointed, or
the issuer trustee agrees to act as trust manager, the trust manager must
continue as trust manager. If a replacement trust manager is not appointed
within 90 days of the issuer trustee electing to appoint a new trust manager,
the issuer trustee will be the new trust manager.
LIMITATION OF TRUST MANAGER'S LIABILITY
The principal limitations on the trust manager's liability are set out
in full in the master trust deed. These include the following limitations:
o the trust manager will be indemnified out of the trust in respect of
any liability, cost or expense properly incurred by it in its capacity
as trust manager of the trust; and
o subject to the master trust deed, the trust manager is not responsible
for any act, omission, misconduct, mistake, oversight, error of
judgment, forgetfulness or want of prudence on the part of the issuer
trustee or any agent appointed by the issuer trustee or on whom the
trust manager is entitled to rely under the master trust deed, other
than a related company, attorney, banker, receiver, barrister,
solicitor, agent or other person acting as agent or adviser to the
trust manager, except to the extent of losses, costs, claims or
damages caused or contributed to by the breach of its obligations
under any transaction documents, any fixed-floating rate swap and the
currency swaps.
THE NOTE TRUSTEE
The Bank of New York 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 that the note trustee
has
102
selected with reasonable care. The note trustee and every other person properly
appointed by it under the note trust deed will be entitled to indemnification
from the assets of the trust against all loss, liability, expense, costs,
damages, actions, proceedings, claims and demands incurred by, or made against,
the note trustee in connection with its execution of the trusts under the note
trust deed or of their powers or in respect of any matter or thing done or
omitted in any way relating to it, provided that the indemnification will not
extend to any loss, liability or expense arising from any fraud, negligence or
willful 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$50,000,000, as set forth in its most recent published annual report of
condition, and subject to supervision or examination by federal, state or
District of Columbia authority. The note trustee may also, if permitted by the
SEC, be organized under the laws of a jurisdiction other than the United States,
provided that it is authorized under such laws to exercise corporate trust
powers and is subject to examination by authority of such jurisdictions
substantially equivalent to the supervision or examination applicable to a
trustee in the United States.
The note trustee may resign after giving three months' written notice
to the issuer trustee, the trust manager, the security trustee and each rating
agency. The issuer trustee may also remove the note trustee in the following
circumstances:
o if the note trustee becomes insolvent;
o if the note trustee ceases its business;
o if the note trustee fails to comply with any of its obligations under
any transaction document and the issuer trustee determines that this
failure has had, or if continued, will have, a Material Adverse
Effect, and if capable of remedy, the note trustee does not remedy
this failure within 14 days after the earlier of the following:
o the note trustee becoming aware of this failure; and
o receipt by the note trustee of written notice with respect to
this failure from either the issuer trustee or the trust manager;
or
o if the note trustee fails to satisfy any obligation imposed on it
under the United States Trust Indenture Act of 1939 with respect to
the trust or the note trust deed.
Holders of 75% of the aggregate outstanding Principal Amount of the US$
notes may require the issuer trustee to remove the note trustee.
Any resignation or removal of the note trustee and appointment of a
successor note trustee will not become effective until acceptance of the
appointment by a successor note trustee.
103
NOTE TRUSTEE'S ANNUAL REPORT
To the extent required by the United States Trust Indenture Act of
1939, as amended, the note trustee will mail each year to all US$ noteholders a
report concerning:
o its eligibility and qualifications to continue as trustee under the
note trust deed;
o any amounts advanced by it under the note trust deed;
o the amount, interest rate and maturity date of indebtedness owing by
the issuer trustee to it in the note trustee's individual capacity;
o the property and funds physically held by it as note trustee;
o any release or release and substitution of collateral subject to the
lien of the security trust deed that has not previously been reported;
and
o any action taken by it that materially affects the US$ notes and that
has not previously been reported.
LIST OF NOTEHOLDERS
Three or more beneficial holders of US$ notes, each of whom has owned a
US$ note for at least six months, may, upon written request to the note trustee,
obtain access to the current list of US$ noteholders of the issuer trustee for
purposes of communicating with other US$ noteholders concerning their rights
under the note trust deed or the US$ notes. The note trustee may elect not to
give the requesting noteholders access to the list if it agrees to mail the
desired communication or proxy to all applicable noteholders.
REPORTS
On or before January 31 of each calendar year, the principal paying
agent, on behalf of the note trustee, will furnish to each person who at any
time during the prior calendar year was a US$ noteholder, a statement containing
the information required to be provided by an issuer of indebtedness under the
Code.
THE SECURITY TRUST DEED
GENERAL
Perpetual Trustee Company Limited of Level 7, 9 Castlereagh Street,
Sydney, New South Wales, Australia will be the security trustee. Perpetual
Trustee Company Limited's principal activities are the provision of services as
trustee, executors, administrators, attorneys and agents and other fiduciary
services. The issuer trustee will grant a first ranking floating charge,
registered with the Australian Securities and Investments Commission, over all
of the trust assets in favor of the security trustee. The floating charge will
secure the issuer trustee's obligations to the noteholders, the trust manager,
the security trustee, the servicer, the note trustee, the underwriters, each
paying agent, the calculation agent, the mortgage insurers, the underwriters,
the seller with respect to the Accrued Interest Adjustment and seller's fees and
each provider of a support facility. These secured parties are collectively
known as the MORTGAGEES.
104
NATURE OF THE CHARGE
A company may not deal with its assets over which it has granted a
fixed charge without the consent of the relevant mortgagee. Fixed charges are
usually given over real property, marketable securities and other assets which
will not be dealt with by the company.
A floating charge, like that created by the security trust deed, does
not attach to specific assets but instead "floats" over a class of assets which
may change from time to time. The company granting the floating charge may deal
with those assets and give third parties title to those assets free from any
encumbrance, provided such dealings and transfers of title are in the ordinary
course of the company's business. The issuer trustee has agreed not to dispose
of or create interests in the assets of the trust subject to the floating charge
except in the ordinary course of its business and the trust manager has agreed
not to direct the issuer trustee to take any such actions. If the issuer trustee
disposes of any of the trust assets, including any housing loan, in the ordinary
course of its business, the person acquiring the property will take it free of
the floating charge. The floating charge granted over the trust assets will
crystallize, which means it becomes a fixed charge, upon the occurrence of
specific events set out in the security trust deed, including notice to the
issuer trustee following an event of default under the security trust deed. On
crystallization of the floating charge, the issuer trustee may not deal with the
assets of the trust without the consent of the security trustee.
THE SECURITY TRUSTEE
The security trustee is appointed to act as trustee on behalf of the
Mortgagees and holds the benefit of the charge over the trust assets in trust
for each Mortgagee on the terms and conditions of the security trust deed. If
there is a conflict between the duties owed by the security trustee to any
Mortgagees or class of Mortgagees, the security trustee must give priority to
the interests of the noteholders, as determined by the noteholders or the note
trustee acting on their behalf. In addition, the security trustee must give
priority to the interests of the Redraw noteholders and the Class A noteholders
if, in the security trustee's opinion, there is a conflict between the interests
of the Redraw noteholders, the interests of the Class A noteholders, the
interests of the Class AB noteholders and the interests of the Class B
noteholders or other Mortgagees. The security trustee must give priority to the
interests of the Class AB noteholders if, in the security trustee's opinion,
there is a conflict between the interests of the Class AB noteholders and the
interests of the Class B noteholders or other Mortgagees (other than the Redraw
noteholders and the Class A noteholders).
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.
105
o Any action taken by the security trustee under the security trust deed
or any collateral security binds all the Mortgagees.
o The security trustee in its capacity as a Mortgagee can exercise its
rights and powers as such as if it were not acting as the security
trustee. It and its associates may engage in any kind of business with
the issuer trustee, the trust manager, Mortgagees and others as if it
were not security trustee and may receive consideration for services
in connection with any transaction document or otherwise without
having to account to the Mortgagees.
EVENTS OF DEFAULT
Each of the following is an event of default under the security trust
deed:
o the issuer trustee fails to pay:
o any interest within 10 business days of the relevant payment date
on which the interest was due to be paid to noteholders; or
o any other amount owing to a Mortgagee within 10 business days of
the due date for payment, or within any applicable grace period
agreed with the relevant Mortgagee, or where the Mortgagee is a
US$ noteholder, with the note trustee;
o the issuer trustee fails to perform or observe any other provisions,
other than the obligations already referred to in this section, of a
transaction document, any fixed-floating rate swap or the currency
swaps and that default is not remedied within 30 days after written
notice from the security trustee requiring the failure to be remedied;
o an Insolvency Event occurs relating to the issuer trustee, in its
capacity as trustee of the trust;
o the charge created by the security trust deed is not or ceases to be a
first ranking charge over the assets of the trust, or any other
obligation of the issuer trustee, other than as mandatorily preferred
by law, ranks ahead of or equal with any of the moneys secured by the
security trust deed;
o any security interest over the trust assets is enforced;
o for so long as any Secured Monies are owed to the Redraw noteholders
and the Class A noteholders, a fixed-floating rate swap or the Class A
currency swap is terminated and a replacement fixed-floating rate swap
or Class A currency swap, as the case may be, on terms that will not
lead to a withdrawal or downgrade of the rating of any notes, is not
put in place;
o for so long as no Secured Monies are owed to the Redraw noteholders
and the Class A noteholders, a fixed-floating rate swap or the Class
AB currency swap is terminated and a replacement fixed-floating rate
swap or Class AB currency swap, as the case may be, on terms that will
not lead to a withdrawal or downgrade of the rating assigned to any
notes, is not put in place;
106
o for so long as no Secured Monies are owed to the Redraw noteholders,
the Class A noteholders or the Class AB noteholders, a fixed-floating
rate swap or the Class B currency swap is terminated and a replacement
fixed-floating rate swap or Class B currency swap, as the case may be,
on terms that will not lead to a withdrawal or downgrade of the rating
assigned to any notes, is not put in place;
o all or any part of any transaction document, other than a
fixed-floating rate swap or a currency swap, is terminated or is or
becomes void, illegal, invalid, unenforceable or of limited force and
effect or a party becomes entitled to terminate, rescind or avoid all
or part of any transaction document, other than or a fixed-floating
rate swap or a currency swap; or
o without the prior consent of the security trustee, that consent being
subject in accordance with the terms of the security trust deed to the
prior written consent of the Noteholder Mortgagees:
o the trust is wound up, or the issuer trustee is required to wind
up the trust under the master trust deed or applicable law, or
the winding up of the trust commences;
o the trust is held or is conceded by the issuer trustee not to
have been constituted or to have been imperfectly constituted; or
o unless another trustee is appointed to the trust under the
transaction documents, the issuer trustee ceases to be authorized
under the trust to hold the property of the trust in its name and
to perform its obligations under the transaction documents, any
fixed-floating rate swap or the currency swaps.
Where the security trustee has notified the rating agencies, obtained
the written consent of the relevant Noteholder Mortgagees and, in its reasonable
opinion, considers that it would not be materially prejudicial to the interests
of the Mortgagees, it may elect to treat an event that would otherwise be an
event of default as not being an event of default for the purpose of the
security trust deed. Unless the security trustee has made such an election and
provided the security trustee is actually aware of the occurrence of an event of
default, the security trustee must promptly convene a meeting of the Voting
Mortgagees at which it shall seek directions from the Voting Mortgagees by way
of Extraordinary Resolution of Voting Mortgagees regarding the action it should
take as a result of that event of default.
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 with respect only to the enforcement of the charge under the security
trust deed, for as long as amounts outstanding under the Redraw notes,
the Class A notes and the Class AB notes are 75% or more of the total
Secured Monies, the Noteholder Mortgagees; and
o otherwise, the note trustee, acting on behalf of the US$ noteholders
and each other Mortgagee.
107
The security trustee must promptly convene a meeting of the Voting
Mortgagees after it receives notice, or has actual knowledge of, an event of
default under the security trust deed.
VOTING PROCEDURES
Every question submitted to a meeting of Voting Mortgagees shall be
decided in the first instance by a show of hands. If a show of hands results in
a tie, the chairman shall both on a show of hands and on a poll have a casting
vote in addition to the vote or votes, if any, to which he may be entitled as
Voting Mortgagee or as a representative. A representative is, in the case of any
noteholder, a person or body corporate appointed as a proxy for that noteholder.
On a show of hands, every person holding, or being a representative holding or
representing other persons who hold, Secured Monies shall have one vote except
that the note trustee shall represent each US$ noteholder who has directed the
note trustee to vote on its behalf under the note trust deed. On a poll, every
person who is present shall have one vote for every US$10,000 or its equivalent,
but not part thereof, of the Secured Monies that he holds or in respect of which
he is a representative.
A resolution of all the Voting Mortgagees, including an Extraordinary
Resolution, may be passed, without any meeting or previous notice being
required, by an instrument or notes in writing which have been signed by all of
the Voting Mortgagees.
ENFORCEMENT OF CHARGE
At any time after an event of default occurs, a resolution passed at a
duly convened meeting by a majority consisting of not less than 75% of the votes
capable of being cast by Voting Mortgagees present in person or by proxy or a
written resolution signed by all of the Voting Mortgagees may direct the
security trustee to do any or all of the following:
o declare the charge to be enforceable;
o declare all Secured Monies immediately due and payable;
o convert the floating charge to a fixed charge over any or all of the
trust assets; or
o appoint a receiver over the trust assets or itself exercise the powers
that a receiver would otherwise have under the security trust deed.
If the Noteholder Mortgagees are the only Voting Mortgagees, they may
direct the security trustee to do any act which the security trustee is required
to do, or may only do, at the direction of an Extraordinary Resolution of Voting
Mortgagees, including enforcing the charge.
THE NOTE TRUSTEE AS VOTING MORTGAGEE
If an event of default under the security trust deed occurs and is
continuing, the issuer trustee and the trust manager will promptly notify the
note trustee of such an occurrence and the note trustee shall deliver to each
US$ noteholder notice of such event of default within 90 days of the date that
the note trustee became aware of such event of default. However in the case of a
default in payment of interest and principal on the notes, the note trustee may
withhold such notice if and so long as it determines in good faith that
withholding the notice is in the interests of US$ noteholders.
108
The rights, remedies and discretion of the US$ noteholders under the
security trust deed, including all rights to vote or give instructions or
consents to the security trustee and to enforce its undertakings and warranties,
may only be exercised by the note trustee on behalf of the US$ noteholders, and
the security trustee may rely on any instructions or directions given to it by
the note trustee as being given on behalf of the US$ noteholders without inquiry
about compliance with the note trust deed.
The note trustee shall not be bound to vote under the security trust
deed, or otherwise direct the security trustee under the security trust deed or
to take any proceedings, actions or steps under, or any other proceedings
pursuant to or in connection with the security trust deed, the note trust deed
or any notes unless directed or requested to do so by the holders of at least
75% of the aggregate outstanding Principal Amount of the relevant class of US$
notes and then only if the note trustee is indemnified to its satisfaction
against all action, proceedings, claims and demands to which it may render
itself liable and all costs, charges, damages and expenses which it may incur by
so doing.
If any of the US$ notes remain outstanding and are due and payable
otherwise than by reason of a default in payment of any amount due on the US$
notes, the note trustee must not vote under the security trust deed to, or
otherwise direct the security trustee to, dispose of the mortgaged property
unless either:
o the note trustee is of the opinion, reached after considering at any
time and from time to time the advice of a merchant bank or other
financial adviser selected by the note trustee, a sufficient amount
would be realized to discharge in full all amounts owing to the US$
noteholders, and any other amounts payable by the issuer trustee
ranking in priority to or equal with the US$ notes; or
o the note trustee is of the opinion, reached after considering at any
time and from time to time the advice of a merchant bank or other
financial adviser selected by the note trustee, that the cash flow
receivable by the issuer trustee or the security trustee under the
security trust deed will not, or that there is a significant risk that
it will not, be sufficient, having regard to any other relevant
actual, contingent or prospective liabilities of the issuer trustee,
to discharge in full in due course all the amounts referred to in the
preceding paragraph.
LIMITATIONS OF ACTIONS BY THE SECURITY TRUSTEE
The security trustee is not obliged to take any action, give any
consent or waiver or make any determination under the security trust deed
without being directed to do so by the note trustee or by Extraordinary
Resolution of the Voting Mortgagees in accordance with the security trust deed.
The security trustee is not obligated to act unless it obtains an indemnity from
the Voting Mortgagees and funds have been deposited on behalf of the security
trustee to the extent to which it may become liable for the relevant enforcement
actions.
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,
109
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, other than
those payable under the fourth bullet point, payable to the security
trustee or note trustee under the security trust deed or the note
trust deed;
o third, to the extent that any monies received by the security trustee
represent the proceeds of any cash collateral lodged by a support
facility provider, to pay that support facility provider;
o fourth, to pay pro rata:
o any fees and other expenses due to the security trustee, the note
trustee, a paying agent, the calculation agent or the note
registrar;
o any fees and expenses incurred in relation to the operation and
administration of the trust, including the issuer trustee's fees
and expenses; and
o the receiver's remuneration;
o fifth, to pay pro rata the unpaid Accrued Interest Adjustment due to
the seller;
o sixth, to pay pro rata:
110
o monetary liabilities of the issuer trustee to all providers of
support facilities other than to the currency swap provider for a
liability owing under the Class B currency swap or to the
currency swap provider for a liability owing under the Class AB
currency swap;
o monetary liabilities of the issuer trustee to the Redraw
noteholders and the Class A noteholders, pro rata between each
class;
o monetary liabilities owing in relation to any redraws;
o seventh, to pay pro rata:
o monetary liabilities of the issuer trustee to Class AB
noteholders, pro rata; and
o monetary liabilities of the issuer trustee to the currency swap
provider under the Class AB currency swap;
o eighth, to pay pro rata:
o monetary liabilities of the issuer trustee to Class B
noteholders, pro rata; and
o monetary liabilities of the issuer trustee to the currency swap
provider under the Class B currency swap;
o ninth, to pay pro rata any amounts not covered in this section owing
to any Mortgagee under any transaction document, any fixed-floating
rate swap or a currency swap;
o tenth, 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 eleventh, 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".
111
If, at any time, the security trustee is required to take any action
relating to the enforcement of the terms of the transaction documents, any fixed
- -floating rate swap or the currency swaps upon default by any other party, the
security trustee shall be entitled to additional remuneration.
INDEMNIFICATION
The issuer trustee has agreed to indemnify the security trustee from
and against all losses, costs, liabilities, expenses and damages arising out of
or in connection with the transaction documents, any fixed-floating rate swap or
the currency swaps except to the extent that they result from the fraud,
negligence or wilful default of the security trustee.
RETIREMENT AND REMOVAL OF THE SECURITY TRUSTEE
The security trustee may retire on three months' notice in writing to
the issuer trustee, the trust manager and each rating agency if a successor
security trustee is appointed.
Subject to the appointment of a successor security trustee and prior
notice being given to each rating agency, an Extraordinary Resolution of the
Voting Mortgagees may remove the security trustee at any time and the trust
manager may remove the security trustee if:
o an Insolvency Event occurs in relation to the security trustee in its
personal capacity;
o the security trustee ceases business;
o the security trustee fails to remedy within 14 days after written
notice from the trust manager any material breach of duty by it; or
o there occurs a change in the control of the security trustee from that
existing on the date of the security trust deed, unless approved by
the trust manager.
Upon notice of resignation or removal of the security trustee, the
trust manager has the right to appoint a successor security trustee who has been
previously approved by an Extraordinary Resolution of the Voting Mortgagees and
who accepts the appointment. If no successor security trustee is appointed
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.
112
THE CHECK ACCOUNT AND DIRECT PAPERLESS ENTRY FACILITIES AGREEMENT
The servicer has arranged for National Australia Bank Limited to
provide borrowers with an option to utilise a check account and direct entry
paperless facility which provides borrowers with an expanded range of financial
services that are directly linked to the borrower's mortgage loan account. The
provision of these facilities has been documented in a check deposit and direct
paperless entry facilities agreement between National Australia Bank Limited,
the servicer and the issuer trustee known as the NBFI AGREEMENT.
The facilities under the NBFI Agreement are being provided to both:
o borrowers in relation to the trust; and
o borrowers under other Interstar mortgage backed securities programs
which are funded by various warehouse funding trusts, other Interstar
Millennium Trusts and other trusts which issue mortgage backed
securities. Perpetual Trustees Victoria Limited is the trustee of each
of these other trusts.
Under the terms of the NBFI Agreement, the servicer is responsible for
the day to day verification and processing of checks and direct entry paperless
facilities. In providing these facilities to borrowers, there is a possibility
that the servicer may:
o process and authorize the issuer trustee to pay forged or fraudulently
drawn checks or entries;
o fail to comply with stop payment notices made by borrowers; or
o breach other covenants, representations and warranties or other
provisions of the NBFI Agreement.
The NBFI Agreement also requires the issuer trustee to place monies
from the trust into an account known as the TRUST DRAWINGS ACCOUNT which is
maintained with National Australia Bank Limited in the name of Perpetual
Trustees Victoria Limited -- Interstar Securities MBS Program Distribution
Account. The other trusts are also required to deposit monies into this account
thereby resulting in co-mingling of part of the assets of the trust with assets
of other trusts.
National Australia Bank Limited may, in accordance with the terms of
the NBFI Agreement, be entitled to withdraw monies out of that Trust Drawings
Account to the limit of moneys held in that account. National Australia Bank
Limited may withdraw those monies even though the legal entitlement of National
Australia Bank Limited in that regard relates to a matter or thing concerning
one of the other trusts and not the trust. In those circumstances, the other
trust would be required to replenish the Trust Drawings Account. There is no
guarantee that the other trusts will have the financial capacity at the relevant
time to replenish the Trust Drawings Account in these circumstances.
113
THE INVESTMENT MANAGEMENT AGREEMENT
SERVICING OF HOUSING LOANS
The servicer is required to administer the housing loans in the
following manner:
o in accordance with the investment management agreement;
o to the highest standard of accepted servicing practice of prudent
mortgage lending and investment management institutions;
o exercising a high degree of skill and care in respect thereof; and
o in compliance with all relevant legislation.
In performing any services under the investment management agreement
the servicer shall take into account whether its performance of such services
may adversely affect the rating of any notes. The servicer is entitled to
delegate its duties under the investment management agreement. The servicer at
all times remains liable for servicing the housing loans and the acts or
omissions of any delegate.
POWERS
The servicer has the express power, among other things:
o to waive any fees which may be collected in the ordinary course of
servicing the housing loans or arrange the rescheduling of interest
due and unpaid following a default under any housing loans;
o to waive any right in respect of the housing loans and mortgages in
the ordinary course of servicing the housing loans and mortgages; and
o to extend the maturity date of a housing loan beyond 30 years from the
date of origination when required to do so by law or a government
agency. This extension is not subject to the requirement that the
action not have a Material Adverse Effect.
With respect to these express powers set forth in the first and second
bullet points above, the servicer shall take into account whether its
performance will have a Material Adverse Effect.
UNDERTAKINGS BY THE SERVICER
The servicer has undertaken, among other things, the following:
o to collect all monies due under the housing loans and related
mortgages and pay them into the collection account;
o if a default occurs in respect of a housing loan, to take action in
accordance with its normal enforcement procedures to enforce the
relevant housing loan and the related mortgage to the extent it
determines to be appropriate;
114
o to act in accordance with the terms of any mortgage insurance policies
or title insurance policies, not do or omit to do anything which could
be reasonably expected to prejudicially affect or limit its rights or
the rights of the issuer trustee under or in respect of a mortgage
insurance policy or title insurance policy;
o not consent to the creation or existence of any security interest in
favor of a third party in relation to any mortgaged property which
would rank before or equal with the related housing loan and mortgage
or allow the creation or existence of any other security interest in
the mortgaged property unless priority arrangements are entered into
with such third party under which the third party acknowledges that
the housing loan and the related mortgage rank ahead in priority to
the third party's security interest on enforcement for an amount not
less than the Unpaid Balance of the housing loan plus such other
amount as the servicer determines in accordance with the servicer's
ordinary course of business;
o to ensure that the authorized investments held by the issuer trustee
yield an amount which is 0.25% per annum greater than the amount
required to ensure that the issuer trustee has sufficient cash at all
times to enable the issuer trustee to pay all payments of interest in
respect of the notes and otherwise to comply with all of the issuer
trustee's duties and obligations under the transaction documents, any
fixed-floating rate swap and the currency swaps as and when they fall
due;
o to give notice in writing to the issuer trustee and each rating agency
if it becomes aware of the occurrence of any Servicer Transfer Event;
o to maintain in effect all qualifications, consents, licenses, permits,
approvals, exemptions, filings and registrations as may be required
under any applicable law in order properly to service the housing
loans and mortgages and to perform or comply with its obligations
under the investment management agreement;
o to notify the issuer trustee and the trust manager of any event which
it reasonably believes is likely to have a Material Adverse Effect
promptly after becoming aware of such event; and to notify the trust
manager of anything else which the trust manager reasonably requires
regarding any proposed modification to any housing loan or related
mortgage; and
o to provide information reasonably requested by the issuer trustee or
the trust manager, with respect to all matters relating to the trust
and the assets of the trust that the issuer trustee or the trust
manager believes reasonably necessary for it to perform its
obligations under the transaction documents, any fixed-floating rate
swaps and the currency swaps and upon reasonable notice and at
reasonable times permit the issuer trustee to enter the premises and
inspect the data and records in relation to the trust and the housing
loan agreements, mortgages, certificates of title and other documents
related to the housing loans.
115
SERVICING COMPENSATION AND EXPENSES
The servicer will receive a fee for servicing the housing loans equal
to 0.220% per annum of the aggregate outstanding Principal Amount of the notes
- -- with respect to the US$ notes, the A$ Equivalent -- on the first day of each
Collection Period payable in arrears on the next payment date.
The servicer must pay from such fee all expenses incurred in connection
with servicing the housing loans, except for expenses relating to the
enforcement of a housing loan or its related mortgaged property or any amount
repaid to a liquidator or trustee in bankruptcy pursuant to any applicable law,
binding code, order or decision of any court, tribunal or the like or based on
advice of the servicer's legal advisers.
LIABILITY OF THE SERVICER
The servicer fully indemnifies the issuer trustee against all losses,
liabilities, costs and expenses incurred as a result of the failure by the
servicer to perform its duties under the investment management agreement or any
action or conduct undertaken or not taken by the servicer, including as a
consequence of a Servicer Transfer Event.
TERMINATION OF THE SERVICER
The issuer trustee must terminate the servicer's appointment if the
issuer trustee determines that any of the following SERVICER TRANSFER EVENTS
occurs:
o an Insolvency Event occurs with respect to the servicer;
o the servicer fails to pay any amount within 5 business days of receipt
of a notice to do so from the issuer trustee or the trust manager;
o the servicer fails to comply with any of its other obligations under
any transaction document and such action has had, or, if continued
will have, a Material Adverse Effect, as determined by the issuer
trustee and that failure is not remedied within the earlier of 30 days
after the servicer becomes aware of that failure and receipt of a
notice from either the issuer trustee or the trust manager;
o any representation, warranty or certification made by the servicer is
incorrect when made and is not waived by the issuer trustee or
remedied to the issuer trustee's reasonable satisfaction within 90
days after notice from the issuer trustee, and the issuer trustee
determines that breach would have a Material Adverse Effect; or
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.
116
REPLACEMENT OF THE SERVICER
The trust manager and the issuer trustee shall use reasonable efforts
to find an eligible successor servicer. Until a successor servicer is appointed,
the servicer must continue to act as the servicer and will be paid the servicing
fee. If an eligible successor servicer is not appointed by the expiration of the
90 day notice period, the issuer trustee itself will act as servicer and be
entitled to the servicing fee.
TERMINATION OF INVESTMENT MANAGEMENT AGREEMENT
The investment management agreement will terminate on the earlier of:
o the date on which the investment management agreement is terminated
pursuant to a Servicer Transfer Event;
o the date which is one month after the notes have been redeemed in full
in accordance with the transaction documents and the issuer trustee
ceases to have any obligation to any creditor in relation to any
trust;
o the date on which the issuer trustee replaces the servicer with a
successor servicer; and
o the date on which the servicer is replaced after resigning.
AMENDMENT
The servicer and the issuer trustee may amend the investment management
agreement provided that each rating agency has confirmed that the amendment will
not have an adverse effect on the rating of any notes and the trust manager
certifies to the issuer trustee that, in the trust manager's opinion the
amendment will not adversely effect the rights of the noteholders.
THE BACKUP SERVICER AGREEMENT
The issuer trustee, the backup servicer and the servicer have entered
into the backup servicer agreement. Under the backup servicer agreement, the
issuer trustee has agreed that in the event the servicer is removed or retires
as a servicer of certain trusts, including the trust, it will request the backup
servicer to become the servicer of the trust. The backup servicer is obliged to
become servicer at the request of the issuer trustee.
The backup servicer will act as servicer of the trust from the date of
its appointment until such time as the backup servicer is removed or retires in
accordance with the backup servicer agreement. The issuer trustee cannot appoint
the backup servicer as servicer unless the rating agencies have confirmed in
writing to the issuer trustee that such appointment will not have an adverse
effect on the credit ratings of the notes.
Once the backup servicer has been appointed, it will be bound by and
must observe the obligations and shall be entitled to exercise all the rights
and discretions conferred on the servicer under the investment management
agreement as if it were named in the investment management agreement as the
original servicer. Upon the appointment of the backup servicer as servicer,
Interstar Securities (Australia) Pty Limited will immediately provide to the
backup servicer all accounts, books, documents, records or other property
relating to the trust which are in its
117
possession or control. The issuer trustee will promptly arrange to provide the
backup servicer with such accounts or information relating to the trust which
are in the possession or control of the issuer trustee to enable the backup
servicer to fulfil its duties, obligations and discretions as servicer. The
issuer trustee may remove the backup servicer as servicer after providing the
backup servicer with written notice and in accordance with the provisions of the
investment management agreement.
The backup servicer agreement will be governed by the laws of the State
of Victoria.
118
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.
119
It should be noted that Interstar Securities (Australia) Pty Limited
reports all actions that it takes on overdue housing loans to its respective
mortgage insurer in accordance with the terms of the mortgage insurance
policies.
COLLECTION AND FORECLOSURE PROCESS
Subject to the paragraph below, when a housing loan is 90 days
delinquent, a letter of demand is sent to the borrower advising of the situation
and requesting that payment be made to rectify the situation. If a response has
not been received within 15 days of the letter of demand, instructions are sent
to Interstar Securities (Australia) Pty Limited's panel solicitor to commence
recovery action by issuing the relevant default notices pursuant to the
registered mortgage and statutory time allowed in that state or territory.
Recovery action continues until such time as the borrower pays the
amount noted in the default notices, plus interest, legal fees etc., or vacant
possession of the security property is obtained. If a borrower does not respond
to any of the notices issued or served upon him or her, vacant possession may be
obtained within 45 days of issuing the letter of demand.
For housing loans:
o with an original loan balance in excess of A$300,000; or
o which, based on the characteristics of the borrower, the loan-to-value
ratio and payment history, the servicer determines to have a
particular risk profile,
the servicer will issue a letter of demand when the loan is 30 days delinquent.
These time frames assume that the borrower has taken no action to
remedy the default.
Upon gaining possession of the security property, two marketing
appraisals and an updated valuation are requested, with one of the marketing
appraisals selected to market and sell the property via auction or private
treaty. A reserve price/list price is determined with reference to the marketing
appraisals and valuation. Once a figure has been reached, this is submitted to
the mortgage insurer for approval. After the security property is sold and funds
received and an outstanding loan balance remains, a claim for the shortfall is
submitted to the mortgage insurer for processing.
It should also be noted that the mortgagee's ability to exercise its
power of sale on the mortgaged property is dependent upon the statutory
restrictions of the relevant State or Territory as to notice requirements. In
addition, there may be factors outside the control of the mortgagee such as
whether the mortgagor contests the sale and the market conditions at the time of
sale. These issues may affect the length of time between the decision of the
mortgagee to exercise its power of sale and final completion of the sale.
The arrears and security enforcement procedures may change over time as
a result of business changes, or legislative and regulatory changes.
120
SERVICER DELINQUENCY EXPERIENCE
The table below summarizes the delinquency and foreclosure experience
of housing loans serviced by Interstar Securities (Australia) Pty Limited.
INTERSTAR MORTGAGE BACKED PROGRAM -- TOTAL PORTFOLIO HISTORICAL DELINQUENCIES
MARCH 31, SEPTEMBER MARCH 31, SEPTEMBER MARCH 31,
1999 30, 1999 2000 30, 2000 2001
---- -------- ---- -------- ----
Outstanding Balance.. $1,500,609,532.07 $1,968,607,661.73 $2,609,611,105.11 $3,344,250,484.60 $4,021,142,286.04
Number of Loans
Outstanding........ 11,328 14,498 18,579 23,091 27,406
Percentage of
Delinquent
Loans*.............
31 - 60 Days......... 0.55% 0.54% 0.43% 0.35% 0.33%
61 - 90 Days......... 0.38% 0.31% 0.24% 0.16% 0.14%
91 Days Plus......... 0.18% 0.15% 0.13% 0.10% 0.06%
Total
Delinquencies
over 30 Days....... 1.11% 1.00% 0.80% 0.61% 0.53%
MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31,
SIX MONTH PERIOD ENDING 1999 1999 2000 2000 2001
- ------------------------- ---- ---- ---- ---- ----
Loan Losses as a % of
Total Outstanding
Balance**........... 0.00% 0.00% 0.00% 0.00% 0.00%
SEPTEMBER 30, MARCH 31, SEPTEMBER MARCH 31, SEPTEMBER
2001 2002 30, 2002 2003 30, 2003
---- ---- -------- ---- --------
Outstanding Balance.. $4,820,490,560.20 $5,864,319,193.21 $7,436,170,410.31 $8,997,021,037.72 $11,245,965,054.01
Number of Loans
Outstanding........ 32,114 38,133 46,825 56,322 68,364
Percentage of
Delinquent
Loans*.............
31 - 60 Days......... 0.28% 0.40% 0.58% 0.40% 0.39%
61 - 90 Days......... 0.12% 0.19% 0.18% 0.17% 0.17%
91 Days Plus......... 0.06% 0.10% 0.12% 0.15% 0.16%
Total
Delinquencies
over 30 Days....... 0.46% 0.70% 0.89% 0.71% 0.72%
SEPTEMBER 30, MARCH 31, SEPTEMBER MARCH 31, SEPTEMBER 30,
SIX MONTH PERIOD ENDING 2001 2002 30, 2002 2003 2003
- ----------------------- ---- ---- -------- ---- ----
Loan Losses as a % of
Total Outstanding
Balance**............ 0.00% 0.00% 0.00% 0.00% 0.00%
- -------------
* Totals may not sum exactly due to rounding
** Net loss after any claim under Mortgage Insurance
There can be no assurance that the delinquency and foreclosure
experience with respect to the housing loans comprising the housing loan pool
will correspond to the delinquency and foreclosure experience of the servicer's
mortgage portfolio set forth in the foregoing table. Indeed, the statistics
shown in the preceding table represent the delinquency and foreclosure
experience for the total residential mortgage portfolios for each of the years
presented, whereas the aggregate delinquency and foreclosure experience on the
housing loans will depend on the results obtained over the life of the housing
loan pool. In addition, the foregoing statistics include housing loans with a
variety of payment and other characteristics that may not correspond to those of
the housing loans in the pool. Moreover, if the real estate market should
experience an overall decline in property values such that the principal
balances of the housing loans comprising the housing loan pool become equal to
or greater than the value of the related mortgaged properties, the actual rates
of delinquencies and foreclosures could be significantly higher than those
previously experienced by the servicer. In addition, adverse economic
conditions, which may or may not affect real property values, may affect the
timely payment by borrowers of scheduled payments of principal and interest on
the housing loans and, accordingly, the rates of delinquencies, foreclosures,
bankruptcies and losses with respect to the housing loan pool.
121
PREPAYMENT AND YIELD CONSIDERATIONS
The following information is given solely to illustrate the effect of
prepayments of the housing loans on the weighted average life of the US$ notes
under the stated assumptions and is not a prediction of the prepayment rate that
might actually be experienced.
GENERAL
The rate of principal payments and aggregate amount of distributions on
the notes and the yield to maturity of the notes will relate to the rate and
timing of payments of principal and the amount and timing of redraws on the
housing loans. The rate of principal payments on the housing loans will in turn
be affected by the amortization schedules of the housing loans and by the rate
of principal prepayments, including for this purpose prepayments resulting from
refinancing, liquidations of the housing loans due to defaults, casualties,
condemnations and repurchases by a seller. Subject, in the case of fixed rate
housing loans, to the payment of applicable fees, the housing loans may be
prepaid by the mortgagors at any time.
PREPAYMENTS
Prepayments, liquidations and purchases of the housing loans, including
optional purchase of the remaining housing loans in connection with the
termination of the trust, will result in early distributions of principal
amounts on the notes. Prepayments of principal may occur in the following
situations:
o refinancing by borrowers with other financiers;
o receipt by the issuer trustee of enforcement proceeds due to a
borrower having defaulted on its housing loan;
o receipt by the issuer trustee of insurance proceeds in relation to a
claim under a mortgage insurance policy in respect of a housing loan;
o repurchase of the housing loans by a seller as a result of a breach by
it of certain representations;
o repurchase of the housing loans as a result of an optional termination
or a redemption for taxation or other reasons;
o receipt of proceeds of enforcement of the security trust deed prior to
the final maturity date of the notes; or
o receipt of proceeds of the sale of housing loans if the trust is
terminated while notes are outstanding, for example, if required by
law, and the housing loans are then either:
o repurchased by a seller under its right of first refusal; or
o sold to a third party.
122
Since the rate of payment of principal of the housing loans cannot be
predicted and will depend on future events and a variety of factors, no
assurance can be given to you as to this rate of payment or the rate of
principal prepayments. The extent to which the yield to maturity of any note may
vary from the anticipated yield will depend upon the following factors:
o the degree to which a note is purchased at a discount or premium; and
o the degree to which the timing of payments on the note is sensitive to
prepayments, liquidations and purchases of the housing loans.
A wide variety of factors, including economic conditions, the
availability of alternative financing and homeowner mobility may affect the
trust's prepayment experience with respect to the housing loans. In particular,
under Australian law, unlike the law of the United States, interest on loans
used to purchase a principal place of residence is not ordinarily deductible for
taxation purposes.
WEIGHTED AVERAGE LIVES
The weighted average life of a note refers to the average amount of
time that will elapse from the date of issuance of the note to the date each
U.S. dollar in respect of principal repayable under the note is reduced to zero.
Prepayments of principal on the housing loans will tend to shorten the weighted
average lives of the US$ notes, while redraws will tend to extend the weighted
average lives of the US$ notes.
Usually, greater than anticipated principal prepayments will increase
the yield on notes purchased at a discount and will decrease the yield on notes
purchased at a premium. The effect on your yield due to principal prepayments
occurring at a rate that is faster or slower than the rate you anticipated will
not be entirely offset by a subsequent similar reduction or increase,
respectively, in the rate of principal payments. The amount and timing of
delinquencies and defaults on the housing loans and the recoveries, if any, on
defaulted housing loans and foreclosed properties will also affect the weighted
average lives of the notes.
The following table is based on a constant prepayment rate model.
Constant prepayment rate represents an assumed constant rate of prepayment each
month, expressed as a per annum percentage of the principal balance of the pool
of mortgage loans for that month. Constant prepayment rate does not purport to
be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of housing loans, including the
housing loans in your pool. Neither the seller nor the trust manager believes
that any existing statistics of which it is aware provide a reliable basis for
noteholders to predict the amount or timing of receipt of housing loan
prepayments.
The following table is based upon the assumptions in the following
paragraph, and not upon the actual characteristics of the housing loans. Any
discrepancies between characteristics of the actual housing loans and the
assumed housing loans may have an effect upon the percentages of the principal
balances outstanding and weighted average lives of the notes set forth in the
table. Furthermore, since these discrepancies exist, principal payments on the
notes may be made earlier or later than the table indicates.
The following tables were prepared based on the characteristics of the
housing loan pool as described in "Description of the Assets of the Trust"
expected to be acquired by the issuer trustee and the following additional
assumptions:
123
o the initial cut-off date is the close of business on February 2, 2004;
o closing date for the notes is March 10, 2004;
o on the closing date the issuer trustee will purchase housing loans
with an aggregate principal balance of A$1,050,134,438.47;
o payments on the US$ notes are made on each payment date, regardless of
the day on which payment actually occurs, commencing in June 2004, and
are made in accordance with the priorities described in this
prospectus;
o the housing loans' prepayment rates are equal to the respective
percentages of constant prepayment rate indicated in the tables;
o the scheduled payments of principal and interest on the housing loans
will be paid monthly and will be timely delivered on the 14th day of
each month, with no defaults or arrears;
o loans in the initial pool are assumed to have 3 monthly collection
periods prior to the first payment date. Additional loans puchased by
the proceeds of the Prefunding Account are assumed to have 2 monthly
collection periods prior to the first payment date;
o all prepayments are received on the 14th day of each month and include
the full month's interest on the prepayment;
o there are no redraws, principal increases, substitutions or payment
holidays with respect to the housing loans and, accordingly, no Redraw
notes will be issued;
o housing loans bearing a variable rate of interest maintain the rate
set as at the cut-off date;
o Liquid Authorized Investments are maintained at the Prescribed Minimum
Level throughout the life of the notes and the Prescribed Minimum
Level at any time is 1% of the then current sum of the outstanding
Principal Amount of the Class A A$ Equivalent of the outstanding
Principal Amount of the Class A notes, the Class AB A$ Equivalent of
the outstanding Principal Amount of the Class AB notes and the Class B
A$ Equivalent of the outstanding Principal Amount of the Class B
notes;
o principal collections are distributed according to the rules of
distribution set forth in this prospectus;
o all payments under the swaps are made as scheduled;
o the trust manager does not direct the issuer trustee to exercise its
right of optional redemption of the notes, except, with respect to the
line titled "Weighted Average Life -- To Earlier of Clean Up Call and
Step-Up Margin Date (Years)", in respect of which the trust manager
exercises its right to redeem the notes on the earlier to occur of the
Step-Up Margin Date and the payment date on which the total
outstanding Principal Amount of all notes in all classes does not
exceed 10% of the Initial Principal Amount of all notes; and
124
o borrowers in relation to any interest only housing loans in the
portfolio are assumed to pay no principal for a period of fifty-nine
months and will pay principal and interest thereafter.
It is not likely that the housing loans will pay at any constant
prepayment rate to maturity or that all housing loans will prepay at the same
rate. In addition, the diverse remaining terms to maturity of the housing loans
could produce slower or faster distributions of principal than indicated in the
tables at the assumed constant prepayment rate specified, even if the weighted
average remaining term to maturity of the housing loans is the same as the
assumed weighted average remaining term to maturity as described in this
section. You are urged to make your investment decisions on a basis that
includes your determination as to anticipated prepayment rates under a variety
of the assumptions discussed in this prospectus as well as other relevant
assumptions.
In the following tables, the percentages have been rounded to one
decimal place and the weighted average life of a class of notes is determined by
the following three step process:
o multiplying the amount of each payment of principal thereof by the
number of years from the date of issuance to the related payment date,
o summing the results, and
o dividing the sum by the aggregate distributions of principal referred
to in the first clause above and rounding to two decimal places.
125
PERCENTAGE OF INITIAL PRINCIPAL AMOUNT OUTSTANDING OF THE CLASS A NOTES AT THE
FOLLOWING PERCENTAGES OF CONSTANT PREPAYMENT RATE
DATE 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%
- ---- ---- ---- ----- ----- ----- ----- -----
Closing Date....................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
March 14, 2005..................... 99.4% 94.1% 88.8% 83.5% 78.2% 72.9% 67.6%
March 14, 2006..................... 98.7% 88.4% 78.7% 69.5% 60.8% 52.6% 45.1%
March 14, 2007..................... 98.0% 83.1% 69.6% 57.6% 46.9% 38.7% 31.4%
March 14, 2008..................... 97.2% 78.0% 61.5% 47.6% 37.3% 28.8% 21.8%
March 14, 2009..................... 96.3% 73.0% 54.2% 40.0% 29.6% 21.4% 15.2%
March 14, 2010..................... 94.5% 67.7% 47.1% 33.4% 23.2% 15.8% 10.4%
March 14, 2011..................... 92.5% 62.6% 41.6% 27.9% 18.2% 11.6% 7.2%
March 14, 2012..................... 90.4% 57.7% 36.6% 23.2% 14.3% 8.5% 4.9%
March 14, 2013..................... 88.1% 53.1% 32.2% 19.2% 11.1% 6.2% 3.4%
March 14, 2014..................... 85.7% 48.7% 28.2% 15.9% 8.7% 4.6% 2.3%
March 14, 2015..................... 83.1% 44.7% 24.7% 13.2% 6.8% 3.3% 1.5%
March 14, 2016..................... 80.3% 41.2% 21.5% 10.8% 5.2% 2.4% 0.9%
March 14, 2017..................... 77.4% 37.8% 18.7% 8.9% 4.0% 1.7% 0.5%
March 14, 2018..................... 74.1% 34.5% 16.2% 7.3% 3.1% 1.2% 0.3%
March 14, 2019..................... 70.7% 31.4% 14.0% 5.9% 2.4% 0.8% 0.1%
March 14, 2020..................... 67.0% 28.4% 12.0% 4.8% 1.8% 0.5% 0.0%
March 14, 2021..................... 63.1% 25.5% 10.2% 3.9% 1.3% 0.3% 0.0%
March 14, 2022..................... 58.8% 22.8% 8.6% 3.1% 0.9% 0.1% 0.0%
March 14, 2023..................... 54.3% 20.1% 7.2% 2.4% 0.6% 0.0% 0.0%
March 14, 2024..................... 49.5% 17.6% 6.0% 1.9% 0.4% 0.0% 0.0%
March 14, 2025..................... 44.8% 15.3% 4.9% 1.4% 0.2% 0.0% 0.0%
March 14, 2026..................... 40.1% 13.0% 3.9% 1.0% 0.1% 0.0% 0.0%
March 14, 2027..................... 35.0% 10.8% 3.1% 0.7% 0.0% 0.0% 0.0%
March 14, 2028..................... 29.6% 8.6% 2.4% 0.4% 0.0% 0.0% 0.0%
March 14, 2029..................... 23.9% 6.6% 1.7% 0.2% 0.0% 0.0% 0.0%
March 14, 2030..................... 18.2% 4.8% 1.1% 0.0% 0.0% 0.0% 0.0%
March 14, 2031..................... 12.1% 3.0% 0.5% 0.0% 0.0% 0.0% 0.0%
March 14, 2032..................... 6.1% 1.4% 0.1% 0.0% 0.0% 0.0% 0.0%
March 14, 2033..................... 1.4% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0%
March 14, 2034..................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Weighted Average Life -
To earlier of Clean Up Call and
Step-Up Margin Date (Years) ....... 4.93 4.34 3.82 3.36 2.97 2.63 2.33
To Maturity (Years) ............... 18.92 11.37 7.58 5.46 4.17 3.32 2.73
126
PERCENTAGE OF INITIAL PRINCIPAL AMOUNT OUTSTANDING OF THE CLASS AB NOTES AT THE
FOLLOWING PERCENTAGES OF CONSTANT PREPAYMENT RATE
DATE 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%
- ---- ---- ---- ----- ----- ----- ----- -----
Closing Date.................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
March 14, 2005.................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
March 14, 2006.................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 98.1%
March 14, 2007.................. 100.0% 100.0% 100.0% 100.0% 99.9% 82.3% 66.9%
March 14, 2008.................. 100.0% 100.0% 100.0% 100.0% 79.3% 61.3% 46.5%
March 14, 2009.................. 100.0% 100.0% 100.0% 85.2% 62.9% 45.6% 32.3%
March 14, 2010.................. 100.0% 100.0% 100.0% 71.1% 49.4% 33.6% 22.2%
March 14, 2011.................. 100.0% 100.0% 88.4% 59.3% 38.8% 24.7% 15.2%
March 14, 2012.................. 100.0% 100.0% 77.9% 49.3% 30.4% 18.1% 10.4%
March 14, 2013.................. 100.0% 100.0% 68.5% 40.9% 23.7% 13.3% 7.1%
March 14, 2014.................. 100.0% 100.0% 60.1% 33.9% 18.5% 9.7% 4.9%
March 14, 2015.................. 100.0% 95.2% 52.5% 28.0% 14.4% 7.1% 4.0%
March 14, 2016.................. 100.0% 87.6% 45.8% 23.1% 11.1% 5.1% 4.0%
March 14, 2017.................. 100.0% 80.4% 39.8% 18.9% 8.6% 4.0% 4.0%
March 14, 2018.................. 100.0% 73.5% 34.5% 15.5% 6.6% 4.0% 4.0%
March 14, 2019.................. 100.0% 66.8% 29.7% 12.6% 5.1% 4.0% 4.0%
March 14, 2020.................. 100.0% 60.5% 25.5% 10.2% 4.0% 4.0% 3.7%
March 14, 2021.................. 100.0% 54.4% 21.7% 8.2% 4.0% 4.0% 2.4%
March 14, 2022.................. 100.0% 48.5% 18.3% 6.6% 4.0% 4.0% 1.6%
March 14, 2023.................. 100.0% 42.9% 15.3% 5.2% 4.0% 3.9% 1.0%
March 14, 2024.................. 100.0% 37.5% 12.7% 4.1% 4.0% 2.7% 0.7%
March 14, 2025.................. 95.3% 32.5% 10.4% 4.0% 4.0% 1.8% 0.4%
March 14, 2026.................. 85.3% 27.6% 8.4% 4.0% 4.0% 1.2% 0.3%
March 14, 2027.................. 74.6% 22.9% 6.6% 4.0% 3.5% 0.8% 0.2%
March 14, 2028.................. 63.0% 18.4% 5.0% 4.0% 2.4% 0.5% 0.1%
March 14, 2029.................. 51.0% 14.1% 4.0% 4.0% 1.6% 0.3% 0.1%
March 14, 2030.................. 38.7% 10.2% 4.0% 4.0% 0.9% 0.2% 0.0%
March 14, 2031.................. 25.8% 6.5% 4.0% 2.6% 0.5% 0.1% 0.0%
March 14, 2032.................. 13.0% 4.0% 4.0% 1.1% 0.2% 0.0% 0.0%
March 14, 2033.................. 4.0% 4.0% 1.2% 0.2% 0.0% 0.0% 0.0%
March 14, 2034.................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Weighted Average Life -
To earlier of Clean Up Call and
Step-Up Margin Date (Years) ....... 5.01 5.01 5.01 4.96 4.66 4.28 3.90
To Maturity (Years) ............... 25.15 18.51 13.01 9.63 7.48 6.02 5.00
127
PERCENTAGE OF INITIAL PRINCIPAL AMOUNT OUTSTANDING OF THE CLASS B NOTES AT THE
FOLLOWING PERCENTAGES OF CONSTANT PREPAYMENT RATE
DATE 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%
- ---- ---- ---- ----- ----- ----- ----- -----
Closing Date....................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
March 14, 2005..................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
March 14, 2006..................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 98.1%
March 14, 2007..................... 100.0% 100.0% 100.0% 100.0% 99.9% 82.3% 66.9%
March 14, 2008..................... 100.0% 100.0% 100.0% 100.0% 79.3% 61.3% 46.5%
March 14, 2009..................... 100.0% 100.0% 100.0% 85.2% 62.9% 45.6% 32.3%
March 14, 2010..................... 100.0% 100.0% 100.0% 71.1% 49.4% 33.6% 22.2%
March 14, 2011..................... 100.0% 100.0% 88.4% 59.3% 38.8% 24.7% 15.2%
March 14, 2012..................... 100.0% 100.0% 77.9% 49.3% 30.4% 18.1% 10.4%
March 14, 2013..................... 100.0% 100.0% 68.5% 40.9% 23.7% 13.3% 7.1%
March 14, 2014..................... 100.0% 100.0% 60.1% 33.9% 18.5% 9.7% 4.9%
March 14, 2015..................... 100.0% 95.2% 52.5% 28.0% 14.4% 7.1% 4.0%
March 14, 2016..................... 100.0% 87.6% 45.8% 23.1% 11.1% 5.1% 4.0%
March 14, 2017..................... 100.0% 80.4% 39.8% 18.9% 8.6% 4.0% 4.0%
March 14, 2018..................... 100.0% 73.5% 34.5% 15.5% 6.6% 4.0% 4.0%
March 14, 2019..................... 100.0% 66.8% 29.7% 12.6% 5.1% 4.0% 4.0%
March 14, 2020..................... 100.0% 60.5% 25.5% 10.2% 4.0% 4.0% 3.7%
March 14, 2021..................... 100.0% 54.4% 21.7% 8.2% 4.0% 4.0% 2.4%
March 14, 2022..................... 100.0% 48.5% 18.3% 6.6% 4.0% 4.0% 1.6%
March 14, 2023..................... 100.0% 42.9% 15.3% 5.2% 4.0% 3.9% 1.0%
March 14, 2024..................... 100.0% 37.5% 12.7% 4.1% 4.0% 2.7% 0.7%
March 14, 2025..................... 95.3% 32.5% 10.4% 4.0% 4.0% 1.8% 0.4%
March 14, 2026..................... 85.3% 27.6% 8.4% 4.0% 4.0% 1.2% 0.3%
March 14, 2027..................... 74.6% 22.9% 6.6% 4.0% 3.5% 0.8% 0.2%
March 14, 2028..................... 63.0% 18.4% 5.0% 4.0% 2.4% 0.5% 0.1%
March 14, 2029..................... 51.0% 14.1% 4.0% 4.0% 1.6% 0.3% 0.1%
March 14, 2030..................... 38.7% 10.2% 4.0% 4.0% 0.9% 0.2% 0.0%
March 14, 2031..................... 25.8% 6.5% 4.0% 2.6% 0.5% 0.1% 0.0%
March 14, 2032..................... 13.0% 4.0% 4.0% 1.1% 0.2% 0.0% 0.0%
March 14, 2033..................... 4.0% 4.0% 1.2% 0.2% 0.0% 0.0% 0.0%
March 14, 2034..................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Weighted Average Life -
To earlier of Clean Up Call and
Step-Up Margin Date (Years) ....... 5.01 5.01 5.01 4.96 4.66 4.28 3.90
To Maturity (Years) ............... 25.15 18.51 13.01 9.63 7.48 6.02 5.00
128
USE OF PROCEEDS
The proceeds from the issue of the US$ notes, after being exchanged
pursuant to the currency swaps, will amount to A$1,416,182,020. These issue
proceeds, will be used by the issuer trustee, in most part, to acquire from the
seller the seller's beneficial interest in the housing loans and related
mortgages, to make a deposit in the prefunding account, if applicable, and to
acquire Liquid Authorized Investments. See "Description of the Assets of the
Trust -- Acquisition of Housing Loans after the Closing Date" and "Description
of the US$ Notes -- Application of Mortgage Principal Repayments and Liquid
Authorized Investments to Available Income".
LEGAL ASPECTS OF THE HOUSING LOANS
The following discussion is a summary of the material legal aspects of
Australian retail housing loans and mortgages. It is not an exhaustive analysis
of the relevant law. Some of the legal aspects are governed by the law of the
applicable State or Territory of Australia. Laws may differ between such States
and Territories. The summary does not reflect the laws of any particular
jurisdiction or cover all relevant laws of all jurisdictions in which a
mortgaged property may be situated, although it reflects the material aspects of
the laws of New South Wales, without referring to any specific legislation of
that State.
GENERAL
There are two parties to a mortgage. The first party is the mortgagor,
who is either the borrower and homeowner or, where the relevant loan is
guaranteed and the guarantee is secured by a mortgage, the guarantor. The
mortgagor grants the mortgage over their property. The second party is the
mortgagee, who is the lender. Each housing loan will be secured by a mortgage
which has a first ranking priority over all other mortgages granted by the
relevant borrower and over all unsecured creditors of the borrower, except in
respect of certain statutory rights such as some rates and taxes, which are
granted statutory priority.
NATURE OF HOUSING LOANS AS SECURITY
There are a number of different forms of title to land in Australia.
The most common form of title in Australia is "Torrens title". The housing loans
in the proposed housing loan pool are all secured by Torrens title land.
TORRENS TITLE land is freehold or leasehold title, interests in which
are created by registration in one or more central land registries of the
relevant State or Territory of Australia. Each parcel of land is represented by
a specific certificate of title. The central registry retains details and copies
of registered dealings affecting the title and, in most States, the original
certificate is retained by the owner. Any dealing with the relevant land is
carried out by instruments which are registered on the title to the land and, on
registration, become legally effective.
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 registered leases, registered 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.
129
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 walls, roof, stairwells, entrance lobbies and the like,
are known as "common property" and are held by an "owners corporation" for the
benefit of the individual proprietors. All proprietors are members of the owners
corporation, which is vested with the control, management and administration of
the common property and the strata scheme generally, for the benefit of the
proprietors, including the rules governing the apartment block.
Only Torrens title land can be the subject of strata title in this way,
and so the provisions referred to in this section in relation to Torrens title
also 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
130
title over the relevant property would be extinguished. Whether a lease confers
exclusive possession will depend on a construction of the lease and the
legislation under which the lease was granted.
TAKING SECURITY OVER LAND
The law relating to the granting of security over real property is made
complex by the fact that each State and Territory of Australia has separate
governing legislation. The following is a brief overview of some issues involved
in taking security over land.
Under Torrens title, registration of a mortgage using the prescribed
form executed by the mortgagor is required in order for the mortgagee to obtain
both the remedies of a mortgagee granted by statute and the relevant priorities
against other secured creditors. To this extent, the mortgagee is said to have a
legal or registered title. However, registration does not transfer title in the
property and the mortgagor remains as legal owner. Rather, the Torrens title
mortgage takes effect as a statutory charge or security only. The Torrens title
mortgagee does not obtain an "estate" in the property but does have an interest
in the land which is recorded on the register and the certificate of title for
the property. A search of the register by any subsequent creditor or proposed
creditor will reveal the existence of the prior mortgage.
In most States and Territories of Australia, a mortgagee will retain
the certificate of title, if one is issued. Failure to retain the certificate
may in certain circumstances constitute negligent conduct resulting in a
postponement of the mortgagee's priority to a later secured creditor.
In Queensland, under the Land Title Act 1994, duplicate certificates of
title are no longer issued to mortgagees as a matter of practice. A record of
the title is stored on computer at the land registry office and the mortgage is
registered on that computerized title.
Once the mortgagor has repaid the loan, a discharge of mortgage
executed by the mortgagee is lodged with the relevant land registry office by
the mortgagor or the mortgagee and the mortgage will then be removed from the
certificate of title for the property.
ENFORCEMENT OF REGISTERED MORTGAGES
Subject to the discussion in this section, if a borrower defaults under
a housing loan the loan documents provide that all monies under the housing loan
may be declared immediately due and payable. In Australia, a lender may sue to
recover all outstanding principal, interest and fees under the personal covenant
of a borrower contained in the loan documents to repay those amounts. In
addition, the lender may enforce a registered mortgage in relation to the
defaulted loan. Enforcement may occur in a number of ways, including the
following:
o The mortgagee may enter into possession of the property. If it does
so, it does so in its own right and not as agent of the mortgagor, and
so may be personally liable for mismanagement of the property and to
third parties as occupier of the property.
o The mortgagee may, in limited circumstances, lease the property to
third parties.
o The mortgagee may foreclose on the property. Under foreclosure
procedures, the mortgagee extinguishes the mortgagor's title to the
property so that the mortgagee 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
131
to sue the borrower under the personal covenant to repay and can only
look to the value of the property for satisfaction of the debt.
o The mortgagee may appoint a receiver to deal with income from the
property or exercise other rights delegated to the receiver by the
mortgagee. A receiver is the agent of the mortgagor and so, unlike
when the mortgagee enters possession of property, in theory the
mortgagee is not liable for the receiver's acts or as occupier of the
property. In practice, however, the receiver will require indemnities
from the mortgagee that appoints it.
o The mortgagee may sell the property, subject to various duties to
ensure that the mortgagee exercises proper care in relation to the
sale. This power of sale is usually expressly contained in the
mortgage documents, and is also implied in registered mortgages under
the relevant Torrens title legislation. The Torrens title legislation
prescribes certain forms and periods of notice to be given to the
mortgagor prior to enforcement. A sale under a mortgage may be by
public auction or private treaty. Once registered, the purchaser of
property sold pursuant to a mortgagee's power of sale becomes the
absolute owner of the property.
A mortgagee's ability to call in all amounts under a housing loan or
enforce a mortgage which is subject to the Consumer Credit Legislation is
limited by various demand and notice procedures which are required to be
followed. For example, as a general rule enforcement cannot occur unless the
relevant default is not remedied within 30 days after a default notice is given.
Borrowers may also be entitled to initiate negotiations with the mortgagee for a
postponement of enforcement proceedings.
PENALTIES AND PROHIBITED FEES
Australian courts will not enforce an obligation of a borrower to pay
default interest on delinquent payments if the court determines that the
relevant default interest rate is a penalty. Certain jurisdictions prescribe a
maximum recoverable interest rate, although in most jurisdictions there is no
specified threshold rate to determine what is a penalty. In those circumstances,
whether a rate is a penalty or not will be determined by reference to such
factors as the prevailing market interest rates. The Consumer Credit Legislation
does not impose a limit on the rate of default interest, but a rate which is too
high may entitle the borrower to have the loan agreement re-opened on the ground
that it is unjust. Under the Corporations Act 2001 of Australia, the liquidator
of a company may avoid a loan under which an extortionate interest rate is
levied.
The Consumer Credit Legislation requires that any fee or charge to be
levied by the lender must be provided for in the contract, otherwise it cannot
be levied. The regulations under the Consumer Credit Legislation may also from
time to time prohibit certain fees and charges. The Consumer Credit Legislation
also requires that establishment fees, termination fees and prepayment fees must
be reasonable otherwise they may be reduced or set aside.
BANKRUPTCY
The insolvency of a natural person is governed by the provisions of the
Bankruptcy Act 1966 of Australia, which is a federal statute. Generally, secured
creditors of a natural person, 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
132
bankruptcy proceeding as an unsecured creditor in a number of circumstances,
including if they have realized the related mortgaged property and their debt
has not been fully repaid, in which case they can prove for the unpaid balance.
Certain dispositions of property by a bankrupt may be avoided by the trustee in
bankruptcy. These include where:
o the disposition was made to defraud creditors; or
o the disposition was made by an insolvent debtor within 6 months of the
petition for bankruptcy and that disposition gave a preference to an
existing creditor over at least one other creditor.
The insolvency of a company is governed by the Corporations Act 2001 of
Australia. Again, secured creditors generally stand outside the insolvency.
However, a liquidator may avoid a mortgage which is voidable under the
Corporations Act because it is an uncommercial transaction, or an unfair
preference to a creditor or a transaction for the purpose of defeating
creditors, and that transaction occurred:
o when the company was insolvent, or an act is done to give effect to
the transaction when the company is insolvent, or the company becomes
insolvent because of the transaction or the doing of an act to give
effect to the transaction; and
o within a prescribed period prior to the commencement of the winding up
of the company.
ENVIRONMENTAL
Real property which is mortgaged to a lender may be subject to
unforeseen environmental problems, including land contamination. Environmental
legislation which deals with liability for such problems exists at both State
and Federal levels, although the majority of relevant legislation is imposed by
the States. No Australian statute expressly imposes liability on "passive"
lenders or security holders for environmental matters, and some states expressly
exclude such liability. However, liability in respect of environmentally damaged
land, which liability may include the cost of rectifying the damage, may attach
to a person who is, for instance, an owner, occupier or person in control of the
relevant property. In some but not all States, lenders are expressly excluded
from the definitions of one or more of these categories.
Merely holding security over property will not convert a lender into an
occupier. However, a lender or receiver who takes possession of contaminated
mortgaged property or otherwise enforces its security may be liable as an
occupier.
Some environmental legislation provides that security interests may be
created over contaminated or other affected property to secure payment of the
costs of any necessary rectification of the property. The security interests may
have priority over pre-existing mortgages. To the extent that the issuer trustee
or a receiver appointed on its behalf incurs any such liabilities, it will be
entitled to be indemnified out of the assets of the trust.
133
INSOLVENCY CONSIDERATIONS
The current transaction is designed to mitigate insolvency risk. For
example, the assignment of the beneficial interest of the seller in the housing
loans to the issuer trustee should ensure that the housing loans are not assets
available to the liquidator or creditors of the seller in the event of an
insolvency of the seller. Similarly, the assets in the trust should not be
available to other creditors of the issuer trustee in its personal capacity or
as trustee of any other trust in the event of an insolvency of the issuer
trustee.
If any Insolvency Event occurs with respect to the issuer trustee in
its capacity as trustee of the trust, the security trust deed may be enforced by
the security trustee at the direction of the Voting Mortgagees. See "Description
of the Transaction Documents -- The Security Trust Deed -- Enforcement of the
Charge". The security created by the security trust deed will stand outside any
liquidation of the issuer trustee, and the assets the subject of that security
will not be available to the liquidator or any creditor of the issuer trustee,
other than a creditor which has the benefit of the security trust deed until the
secured obligations have been satisfied. The proceeds of enforcement of the
security trust deed are to be applied by the security trustee as set out in
"Description of the Transaction Documents -- The Security Trust Deed --
Priorities Under the Security Trust Deed". If the proceeds from enforcement of
the security trust deed are not sufficient to redeem the notes in full, some or
all of the noteholders will incur a loss.
TAX TREATMENT OF INTEREST ON AUSTRALIAN HOUSING LOANS
Under Australian law, interest on loans used to purchase a person's
primary place of residence is not ordinarily deductible for taxation purposes.
Conversely, interest payments on loans and other non-capital expenditures
relating to non-owner occupied properties that generate taxable income are
generally allowable as tax deductions.
CONSUMER CREDIT LEGISLATION
The majority of the housing loans are regulated by the Consumer Credit
Legislation. Under the Consumer Credit Legislation a borrower has the right to
apply to a court to do the following, among other things:
o vary the terms of a housing loan on the grounds of hardship or that it
is an unjust contract;
o reduce or cancel any interest rate payable on a housing loan if the
interest rate is changed in a way which is unconscionable;
o have certain provisions of a housing loan which are in breach of the
legislation declared unenforceable;
o obtain an order for a civil penalty; or
o obtain additional restitution or compensation in relation to breaches
of the Consumer Credit Legislation in relation to a housing loan or a
mortgage.
Any order under the Consumer Credit Legislation may affect the timing
or amount of interest or principal payments or repayments under the relevant
housing loan, which might in turn affect the timing or amount of interest or
principal payments or repayments to you under the notes.
134
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.
135
UNITED STATES FEDERAL INCOME TAX MATTERS
OVERVIEW
The following is a summary of the material United States federal income
tax consequences of the purchase, ownership and disposition of the US$ notes by
investors who are subject to United States federal income tax. This summary is
based upon current provisions of the Internal Revenue Code of 1986, as amended
(the CODE), proposed, temporary and final Treasury regulations under the Code,
and published rulings and court decisions, all of which are subject to change,
possibly retroactively, or to a different interpretation at a later date by a
court or by the Internal Revenue Service. The parts of this summary which relate
to matters of law or legal conclusions represent the opinion of Mayer, Brown,
Rowe & Maw LLP, special United States federal tax counsel for the trust manager,
and are as qualified in this summary. We have not sought and will not seek any
rulings from the Internal Revenue Service about any of the United States federal
income tax consequences we discuss, and we cannot assure you that the Internal
Revenue Service will not take contrary positions.
Mayer, Brown, Rowe & Maw LLP has prepared or reviewed the statements
under the heading "United States Federal Income Tax Matters" and is of the
opinion that these statements discuss the material United States federal income
tax consequences to investors generally of the purchase, ownership and
disposition of the US$ notes. However, the following discussion does not discuss
and Mayer, Brown, Rowe & Maw LLP is unable to opine as to the unique tax
consequences of the purchase, ownership and disposition of the US$ notes by
investors that are given special treatment under the United States federal
income tax laws, including:
o banks and thrifts;
o insurance companies;
o regulated investment companies;
o dealers in securities;
o investors that will hold the notes as a position in a "straddle" for
tax purposes or as a part of a "synthetic security", "conversion
transaction" or other integrated investment comprised of the notes and
one or more other investments;
o foreign investors, except as specifically set forth below;
o trusts and estates; and
o pass-through entities, the equity holders of which are any of the
foregoing.
Additionally, the discussion regarding the US$ notes is limited to the
United States federal income tax consequences to the initial investors and not
to a purchaser in the secondary market and is limited to investors who will hold
the US$ notes as "capital assets" within the meaning of Section 1221 of the
Code. It is suggested that prospective investors consult their own tax advisors
about the United States federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the US$
notes, including the advisability of making any election discussed under "--
Market Discount".
136
The issuer trustee will be reimbursed for any United States federal
income taxes imposed on it in its capacity as trustee of the trust out of the
assets of the trust. Also, based on the representation of the trust manager that
the trust does not and will not have an office in the United States, the trust
does not and will not avail itself of the office of an agent in the United
States, and the trust is not conducting, and will not conduct, either directly
or through an agent, any activities in the United States, other than in
connection with its issuance of the US$ notes, in the opinion of Mayer, Brown,
Rowe & Maw LLP, the issuer trustee and the trust will not be subject to United
States federal income tax.
In the opinion of Mayer, Brown, Rowe & Maw LLP, special tax counsel for
the trust manager, the US$ notes will be characterized as debt for United States
federal income tax purposes. Each US$ noteholder, by acceptance of a US$ note,
agrees to treat the notes as indebtedness.
Under Treasury regulations, called the "OID Regulations," relating to
original issue discount, a US$ note will be considered issued with original
issue discount if its "stated redemption price at maturity" exceeds its "issue
price" (i.e., the price at which a substantial portion of the US$ notes is first
sold (not including sales to the Underwriters)). In general, a US$ note's
"stated redemption price at maturity" is the sum of all payments to be made on
the US$ note other than payments of "qualified stated interest." Further, if the
US$ notes have any original issue discount, it will be de minimis if it is less
than 1/4% of the principal amount of the offered notes multiplied by the number
of full years included in their term.
INTEREST INCOME ON THE US$ NOTES
Based on the above assumption, except as discussed below, Mayer, Brown,
Rowe & Maw LLP is of the opinion that you will be required to report as ordinary
interest income, the stated interest and original issue discount, if any, on the
US$ notes you hold in accordance with your method of tax accounting. Under the
OID Regulations, if you hold a US$ note issued with a de minimis amount of
original issue discount, you must include this original issue discount in
income, on a pro rata basis, as principal payments are made on the note. If you
purchase a US$ note for more or less than its principal amount, you will
generally be subject, respectively, to the premium amortization or market
discount rules of the Code, discussed below.
SALE OF NOTES
Mayer, Brown, Rowe & Maw LLP is of the opinion that if you sell a US$
note, you will recognize gain or loss equal to the difference between the amount
realized on the sale, other than amounts attributable to, and taxable as,
accrued interest, and your adjusted tax basis in the US$ note. Your adjusted tax
basis in a note will equal your cost for the US$ note, decreased by any
amortized premium and any payments other than interest made on the US$ note and
increased by any market discount or original issue discount previously included
in your income. Any gain or loss will generally be a capital gain or loss, other
than amounts representing accrued interest or market discount, and will be
long-term capital gain or loss if the US$ note was held as a capital asset for
more than one year. In the case of an individual taxpayer, the maximum long-term
capital gains tax rate is lower than the maximum ordinary income tax rate. Any
capital losses realized may be deducted by a corporate taxpayer only to the
extent of capital gains and by an individual taxpayer only to the extent of
capital gains plus US$3,000 of other United States income.
137
MARKET DISCOUNT
In the opinion of Mayer, Brown, Rowe & Maw LLP, you will be considered
to have acquired a US$ note at a "market discount" to the extent the remaining
principal amount of the note exceeds your tax basis in the note, unless the
excess does not exceed a prescribed de minimis amount. If the excess exceeds the
de minimis amount, you will be subject to the market discount rules of Sections
1276 and 1278 of the Code with regard to the note.
In the case of a sale or other disposition of a US$ note subject to the
market discount rules, Section 1276 of the Code requires that gain, if any, from
the sale or disposition be treated as ordinary income to the extent the gain
represents market discount accrued during the period the note was held by you,
reduced by the amount of accrued market discount previously included in income.
In the case of a partial principal payment of a US$ note subject to the
market discount rules, Section 1276 of the Code requires that the payment be
included in ordinary income to the extent the payment does not exceed the market
discount accrued during the period the note was held by you, reduced by the
amount of accrued market discount previously included in income.
Generally, market discount accrues under a straight line method, or, at
the election of the taxpayer, under a constant interest rate method. However, in
the case of bonds with principal payable in two or more installments, such as
the US$ notes, the manner in which market discount is to be accrued will be
described in Treasury regulations not yet issued. Until these Treasury
regulations are issued, you should follow the explanatory Conference Committee
Report to the Tax Reform Act of 1986 for your accrual of market discount. This
Conference Committee Report indicates that holders of these obligations may
elect to accrue market discount either on the basis of a constant interest rate
or as follows:
o for those obligations that have original issue discount, market
discount shall be deemed to accrue in proportion to the accrual of
original issue discount for any accrual period; and
o for those obligations which do not have original issue discount, the
amount of market discount that is deemed to accrue is the amount of
market discount that bears the same ratio to the total amount of
remaining market discount that the amount of stated interest paid in
the accrual period bears to the total amount of stated interest
remaining to be paid on the obligation at the beginning of the accrual
period.
Under Section 1277 of the Code, if you incur or continue debt that is
used to purchase a US$ note subject to the market discount rules, and the
interest paid or accrued on this debt in any taxable year exceeds the interest
and original issue discount currently includible in income on the note,
deduction of this excess interest must be deferred to the extent of the market
discount allocable to the taxable year. The deferred portion of any interest
expense will generally be deductible when the market discount is included in
income upon the sale, repayment, or other disposition of the indebtedness.
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.
138
Due to the complexity of the market discount rules, we suggest that you
consult your tax advisors as to the applicability and operation of these rules.
PREMIUM
In the opinion of Mayer, Brown, Rowe & Maw LLP, you will generally be
considered to have acquired a US$ note at a premium if your tax basis in the
note exceeds the remaining Principal Amount of the note. In that event, if you
hold a US$ note as a capital asset, you may amortize the premium as an offset to
interest income under Section 171 of the Code, with corresponding reductions in
your tax basis in the note if you have made an election under Section 171 of the
Code. Generally, any amortization is on a constant yield basis. However, in the
case of bonds with principal payable in two or more installments, like the US$
notes, the previously discussed conference report, which indicates a
Congressional intent that amortization be in accordance with the rules that will
apply to the accrual of market discount on these obligations, should be followed
for the amortization of such premium. We suggest that you consult your tax
advisor as to the applicability and operation of the rules regarding
amortization of premium.
BACKUP WITHHOLDING
Mayer, Brown, Rowe & Maw LLP is of the opinion that, backup withholding
will be imposed on payments to you of interest paid, and original issue discount
accrued, if any, on the US$ notes if, upon issuance, you fail to supply the
trust manager or its broker with a certified statement, under penalties of
perjury, containing your name, address, correct taxpayer identification number,
and a statement that you are not required to pay backup withholding. The backup
withholding rate is currently 28% for payments made during the taxable years
through 2010. For payments made after 2010, the backup withholding rate will be
increased to 31%. Exempt investors, such as corporations, tax-exempt
organizations, qualified pension and profit sharing trusts, individual
retirement accounts or non-resident aliens who provide certification of their
status as non-resident are not subject to backup withholding. Information
returns will be sent annually to the Internal Revenue Service by the trust
manager and to you stating the amount of interest paid, original issue discount
accrued, if any, and the amount of tax withheld from payments on the US$ notes.
We suggest that you consult your tax advisors about your eligibility for, and
the procedure for obtaining, exemption from backup withholding.
A foreign investor generally will be exempt from backup withholding and
information reporting requirements, assuming payments on the US$ notes are
otherwise exempt from United States federal income tax, provided that such
foreign investor complies with certain certification and identification
procedures in order to prove its exemption. In order for a foreign investor to
prove its exemption, such foreign investor should submit the appropriate
Internal Revenue Service Form W-8, attesting to such foreign investor's foreign
status. We suggest that you consult your tax advisors about your eligibility
for, and the procedure for obtaining, such an exemption.
139
AUSTRALIAN TAX MATTERS
The following is a summary of the material Australian tax provisions
relevant to this transaction. We suggest that you consult your Australian tax
advisors in relation to their investment in the notes.
PAYMENTS OF PRINCIPAL, PREMIUMS AND INTEREST
Under existing Australian tax law, non-resident holders of notes or
interests in any global note, other than persons holding such securities or
interest as part of a business carried on, at or through a permanent
establishment in Australia, are not subject to Australian income tax, on
payments of interest or amounts in the nature of interest other than interest
withholding tax, which is currently 10%, on interest or amounts in the nature of
interest paid on the notes. A premium on redemption is currently accepted by the
Australian Taxation Office (ATO) as an amount in the nature of interest for this
purpose.
For the purposes of withholding tax, interest includes amounts in the
nature of interest (such as a discount in respect of a bill or a premium on
redemption of a note), amounts paid in substitution for interest and amounts
received in exchange for interest in connection with a "washing arrangement". A
washing arrangement is an arrangement under which title to a security is
transferred to a resident shortly before an interest payment is made and the
sole or dominant purpose of the arrangement is to reduce the amount of
withholding tax payable.
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.
Under current law, conditions are:
o the issuer trustee is a company that is a resident of Australia when
it issues the notes and when interest is paid;
o the notes, or a global bond or note or interests in such a global bond
or note, are issued in a manner which satisfies the public offer test
as prescribed under section 128F of the Tax Act; and
o if the issuer trustee is a company acting in the capacity of a
trustee, the trust is not established for charitable purposes and the
only persons capable of benefiting under the trust are companies that
are not acting in the capacity of a trustee.
It is the issuer trustee's intention to issue the notes and interests
in the global notes in a way that will satisfy the public offer test and
otherwise meet the requirements of section 128F of the Tax Act.
This withholding tax exemption will not apply where, at the time of
issue, the issuer trustee knew or had reasonable grounds to suspect that the
notes, or an interest in the notes, was being or would later be acquired, either
directly or indirectly, by an offshore associate of the issuer trustee, within
the meaning of that term under "-- Offering Restrictions -- Australia", other
than in the capacity of a dealer, manager or underwriter in relation to a
placement of the notes or in the capacity of a clearing house, custodian, funds
manager or responsible entity of a registered scheme. The exemption will also
not apply to interest actually paid by the issuer trustee to an
140
offshore associate of the issuer trustee -- other than in the capacity of a
clearing house, paying agent, custodian, funds manager or responsible entity of
a registered scheme -- if, at the time of the payment, the issuer trustee knows,
or has reasonable grounds to suspect, that the payee is such an offshore
associate.
If the requirements for exemption under section 128F of the Tax Act are
met with respect to the notes, payments of principal, interest and any premium
made to a holder of the notes who is not a resident of Australia and who does
not carry on business through a permanent establishment in Australia, will not
be subject to Australian income or withholding tax.
Subject to certain statutory exceptions, tax will be deducted, at the
highest marginal tax rate plus medicare levy, from payments to resident
noteholders who do not provide the issuer trustee with a tax file number or
Australian Business Number pursuant to Part VA of the Tax Act or the
"Pay-As-You-Go" provisions of the tax legislation. Resident noteholders may also
be subject to Australian income tax.
TAXATIONS OF FINANCIAL ARRANGEMENTS
The Australian Federal Government has enacted The New Business
(Taxation of Financial Arrangements) Act (No. 1) 2003 (the TOFA ACT). The TOFA
Act includes measures in relation to the treatment of foreign currency gains and
losses on transactions entered into on or after the first income year commencing
on or after July 1, 2003. In addition, the new rules will also apply, at the
option of the taxpayer, to foreign currency gains and losses on transactions
entered into prior to the first income year commencing after July 1, 2003 but
realized after that time.
The specific taxation implications of these measures will vary as
between noteholders. Broadly, the taxation consequences will depend on whether
noteholders own the notes on revenue or capital account.
The measures should not impact non-resident noteholders who do not have
a permanent establishment in Australia.
Noteholders should seek their own advice in relation to the specific
taxation consequences of these measures.
NOTE TRANSFERS
A noteholder may be subject to taxation in respect of any gain made on
the transfer of notes. The specific taxation implications in respect of the
transfer depends on the nature of the gain which will vary as between
noteholders. Broadly, the taxation consequences will depend on whether
noteholders own the notes on revenue or capital account.
Noteholders should seek their own advice in relation to the specific
taxation consequences of the transfer of their notes.
In addition, noteholders should also seek their own advice regarding
the goods and services tax (GST) implications of the transfer of their notes.
141
PROFIT ON SALE BY NON-RESIDENT NOTEHOLDERS
Under existing Australian law, non-resident holders of notes will not
be subject to Australian income tax on profits derived from the sale or disposal
of an interest in the notes if the profits do not have an Australian source (see
below). If the profits are Australian sourced, an exclusion from Australian
income tax may be available if the non-resident is entitled to the benefit of a
double taxation agreement and the notes are not held as part of a business
carried on, at or through a permanent establishment in Australia.
The source of any profit on the disposal of notes will depend on the
factual circumstances of the actual disposal. Where the notes are acquired and
disposed of pursuant to contractual arrangements entered into and concluded
outside Australia, and the seller and the purchaser are non-residents of
Australia and do not have a business carried on, at or through a permanent
establishment in Australia, the profit should not have an Australian source.
There are however specific withholding tax rules that may apply to
treat a portion of the sale price of notes as interest for withholding tax
purposes. They are as follows:
o under section 128AA of the Tax Act, where a qualifying security (i.e.
a discounted security subject to the accruals regime in Division 16E
of Part III of the Tax Act) is sold and the transfer price exceeds the
issue price, the excess is deemed to be interest which may be subject
to interest withholding tax. Under the existing rules, it is unclear
whether the profit on sale would trigger an interest withholding tax
obligation, even if the notes are issued in accordance with section
128F. However, the Australian government enacted on April 2, 2003
Taxation Laws Amendment Act (No. 1) 2003, which clarifies the
relationship between section 128AA and 128F to exempt from interest
withholding tax deemed interest under section 128AA where that
interest would have been exempt under section 128F. This amendment
applies retrospectively from August 29, 2001; or
o notes that are sold to an Australian resident in connection with a
"washing arrangement" as defined in the Tax Act, where the issue of
notes are not covered by the exception in section 128F.
GOODS AND SERVICES TAX
The goods and services tax regime was introduced in Australia from July
1, 2000.
The GST is a transactions based tax and accordingly may impact various
transactions in which the issuer trustee is involved. Broadly, the impact of the
GST regime will depend on the type of supply made by the issuer trustee.
Where the supply by the issuer trustee is a "taxable supply", the
issuer trustee will have to remit GST equal to 1/11th of the total consideration
received for the supply to the ATO. The issuer trustee can obtain full input tax
credits for GST paid on things acquired to make the taxable supply.
Where the supply by the issuer trustee is a "GST free supply", the
issuer trustee does not remit GST on the supply to the ATO. The issuer trustee
can obtain full input tax credits for GST paid on things acquired to make the
GST free supply.
142
Where the supply by the issuer trustee is an "input taxed supply",
which includes financial supplies, the issuer trustee is not required to remit
GST on the supply. The issuer trustee is generally not entitled to input tax
credits for GST paid on things acquired to make input taxed supplies. In some
circumstances, however, "reduced input tax credits" may be available.
On the basis of the current GST legislation, the issue of the notes
would constitute either a financial supply or a GST-free supply depending on the
status and location of the noteholders. In either case GST is not required to be
remitted (nor is there any need to charge an amount of GST) in respect of the
supply. Payments made to noteholders would not constitute a separate supply for
GST purposes nor consideration for a supply by noteholders.
The acquisition of notes by a noteholder may, in certain circumstances,
be considered by the Australian Commissioner of Taxation to constitute the
making of a financial supply by the noteholder. This is based on a view
expressed by the Australian Commissioner of Taxation in Ruling GSTR 2002/2. In
any event, this will not give rise to a liability for GST on the part of
noteholders but may affect their entitlement to input tax credits on
acquisitions which relate to acquiring notes. Noteholders should seek their own
advice in relation to the GST treatment of the notes and any transactions that
they enter into associated with the notes.
FIXED-FLOATING RATE SWAPS AND GST
Where the fixed-floating rate swap provider is an Australian resident,
the GST implications under current Australian law are as follows:
o the exchange of fixed interest rate obligations for floating interest
rate obligations by the issuer trustee would constitute a financial
supply. Accordingly, the issuer trustee would not be obliged to remit
GST to the ATO and would not be entitled to claim full input tax
credits in relation to the costs associated with making the supply
(although the issuer trustee may be entitled to claim a reduced input
tax credit); and
o the exchange of floating interest rate obligations for fixed interest
rate obligations by the fixed-floating rate swap provider would also
constitute a financial supply.
Where the fixed-floating rate swap provider is not an Australian
resident, the GST implications under current Australian law are as follows:
o the supply of fixed interest rate obligations for floating interest
rate obligations by the issuer trustee to the non-resident
fixed-floating rate swap provider, constitutes a GST-free supply.
Accordingly, the issuer trustee is not required to remit GST to the
ATO, however, the issuer trustee is entitled to claim input taxed
credits in relation to the costs associated with making this supply;
and
o the supply of floating interest rate obligations for fixed interest
rate obligations by the non-resident fixed-floating rate swap provider
to the issuer trustee has no impact for GST purposes.
143
CURRENCY SWAPS AND GST
Where the currency swap provider is an Australian resident, the GST
implications under current Australian law are as follows:
o the exchange of currency denominations by the issuer trustee would
constitute a financial supply. Accordingly, the issuer trustee would
not be obliged to remit GST to the ATO and would not be entitled to
claim full input tax credits in relation to the costs associated with
making the supply (although the issuer trustee may be entitled to
claim a reduced input tax credit); and
o the exchange of currency denominations by the currency swap provider
would also constitute a financial supply.
Where the currency swap provider is not an Australian resident, the GST
implications under current Australian law are as follows:
o the supply of currency denominations by the issuer trustee to the
non-resident currency swap provider, constitutes a GST-free supply.
Accordingly, the issuer trustee is not required to remit GST to the
ATO, however, the issuer trustee is entitled to claim input taxed
credits in relation to the costs associated with making this supply;
and
o the supply of currency denominations by the non-resident currency swap
provider to the issuer trustee has no impact for GST purposes.
DEBT AND EQUITY
Based on Australia's current taxation law, the notes on issue
constitute debt. Accordingly, interest paid by the issuer trustee in respect of
the notes will be tax deductible to the issuer trustee. Interest derived by
Australian tax resident recipients of the notes or non-residents that hold such
notes through a permanent establishment in Australia should be included in the
assessable income of the recipient.
New rules dealing with the characterisation of debt and equity for
Australian taxation purposes have been enacted and have had effect from July 1,
2001.
Broadly, the new rules have been drafted to characterise certain
interests on an economic substance basis rather than according to their legal
form. Interests will generally be regarded as equity where the rights and
returns attaching to the interests are contingent on the economic performance of
the entity, the right or the amount of the return is at the discretion of the
entity, or where the interest is convertible to equity. Interests which impose
an effective non-contingent obligation of an issuer to return to the investor an
amount at least equal to the amount invested will be characterised as debt.
The notes on issue have the following attributes:
o the notes are not convertible to equity;
o interest payable in respect of the notes is based on a specific
formula; and
144
o the rights attaching to the notes and the amount of the return is not
subject to the discretion of the issuer trustee.
In light of these measures, the notes issued by the issuer trustee
should constitute debt.
OTHER TAXES
No stamp, issue, registration or similar taxes are payable in Australia
in connection with the issue of the notes. Furthermore, a transfer of, or
agreement to transfer, notes executed outside Australia should not be subject to
Australian stamp duty.
TAXATION OF THE TRUST
The net income of the trust for a given year of income will be
determined after deducting from the assessable income of the trust any allowable
deductions incurred by the trust. The assessable income will primarily be the
interest income that is derived by the trust from the provision of mortgage
finance. Subject to certain exceptions, the allowable deductions of the trust
will primarily be the expenses which are incurred for the purpose of deriving
assessable income or necessarily incurred in carrying on a business for the
purpose of gaining or producing assessable income. Expenses which are capital in
nature will not be allowable as deductions.
As noted above, the notes should be treated as debt instruments and
therefore interest paid by the trust should be tax deductible to the trust.
Under the current taxation law, the net income of the trust is to be
included in the assessable income of the beneficiaries of the trust who are
presently entitled to the income. This will be so whether or not the income is
actually paid to the beneficiaries, where the beneficiaries were presently
entitled to the net income of the trust. Where the net income is paid to a
beneficiary, it will be assessable to the beneficiary in the year to which the
distribution relates notwithstanding that it may be paid in the following year
of income.
In the case of the trust, the residual income unit is held by Interstar
Securities (Australia) Pty Ltd who will be presently entitled to the net income
of the trust. The trust itself will not currently be liable to income tax on the
net income derived by the trust.
TAX REFORM PROPOSALS
TAXATION OF TRUSTS AS COMPANIES
Under the Review of Business Taxation recommendations it was proposed
that some trusts be taxed as if they were companies as from July 1, 2001. The
Australian federal government released draft legislation to implement these
recommendations. The draft legislation provided that non-fixed trusts would be
taxed as if they were companies. Fixed trusts, however, would not be subject to
the proposed measures and would therefore retain their current taxation
treatment and accordingly will continue to receive flow-through treatment. The
Exposure Draft Legislation was subject to an extensive consultation process. As
a result of this process, the Australian federal government resolved that the
Exposure Draft Legislation involved numerous complications, therefore it has
since been withdrawn.
The Australian federal government may issue new draft rules in relation
to the taxation of trusts in the future, however the form and proposed start
date of these measures remain uncertain.
145
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.
TAX CONSOLIDATION
Australia has introduced a tax consolidation regime that applies to
wholly-owned corporate groups from July 1, 2002. Entry into this system is
optional, however the choice by a head company to consolidate brings all of its
wholly-owned subsidiaries, which are companies, partnership or trusts, into the
regime. An entity is wholly-owned for these purposes if all of the membership
interests in it are held directly or indirectly by the head company.
The head company of a tax consolidated group will be liable for income
tax in respect of itself and all of its wholly-owned group members. The
legislation provides that where, however, the head company fails to meet its
income tax liabilities, each wholly-owned group member is jointly and severally
liable to pay the consolidated group's income tax liabilities. Thus, there is a
contingent risk that the members of a consolidated group may be liable to
contribute to a consolidated group's income tax liabilities.
It is understood that the Challenger group of companies (the CHALLENGER
GROUP) will, or has, elected to consolidate its wholly-owned subsidiaries. The
trust is not a wholly-owned subsidiary of the Challenger Group. This conclusion
is premised on the fact that an entity outside of the Challenger Group holds the
residual capital unit in the trust. As a unitholder unrelated to any member of
the Challenger Group exists, the trust cannot be consolidated and thus is not
and cannot be jointly and severally liable for the Challenger Group's income tax
liabilities.
146
ENFORCEMENT OF FOREIGN JUDGMENTS IN AUSTRALIA
Interstar Securitisation Management Pty Limited is an Australian
private company incorporated with limited liability under the Corporations Act
2001 of Australia. Any final and conclusive judgment of any New York State or
United States Federal Court sitting in the Borough of Manhattan in the City of
New York having jurisdiction recognized by the relevant Australian jurisdiction
in respect of an obligation of Interstar Securitisation Management Pty Limited
in respect of a note, which is for a fixed sum of money and which has not been
stayed or satisfied in full, would be enforceable by action against Interstar
Securitisation Management Pty Limited in the courts of the relevant Australian
jurisdiction without a re-examination of the merits of the issues determined by
the proceedings in the New York State or United States Federal Court, as
applicable, unless:
o the proceedings in New York State or United States Federal Court, as
applicable, involved a denial of the principles of natural justice;
o the judgment is contrary to the public policy of the relevant
Australian jurisdiction;
o the judgment was obtained by fraud or duress or was based on a clear
mistake of fact;
o the judgment is a penal or revenue judgment; or
o there has been a prior judgment in another court between the same
parties concerning the same issues as are dealt with in the judgment
of the New York State or United States Federal Court, as applicable.
A judgment by a court may be given in some cases only in Australian
dollars. Interstar Securitisation Management Pty Limited expressly submits to
the jurisdiction of New York State and United States Federal Courts sitting in
the Borough of Manhattan in the City of New York for the purpose of any suit,
action or proceeding arising out of this offering. Interstar Securitisation
Management Pty Limited has appointed CT Corporation System, 111 Eighth Avenue,
13th Floor, New York, New York 10011, as its agent upon whom process may be
served in any such action.
All of the directors and executive officers of Interstar Securitisation
Management Pty Limited, and certain experts named in this prospectus, reside
outside the United States in the Commonwealth of Australia. Substantially all or
a substantial portion of the assets of all or many of such persons are located
outside the United States. As a result, it may not be possible for holders of
the notes to effect service of process within the United States upon such
persons or to enforce against them judgments obtained in United States courts
predicated upon the civil liability provisions of federal securities laws of the
United States. Interstar Securitisation Management Pty Limited has been advised
by its Australian counsel, Allens Arthur Robinson, that, based on the
restrictions discussed in this section, there is doubt as to the enforceability
in the Commonwealth of Australia, in original actions or in actions for
enforcement of judgments of United States courts, of civil liabilities
predicated upon the federal securities laws of the United States.
147
EXCHANGE CONTROLS AND LIMITATIONS
ANTI-TERRORISM RESTRICTIONS
The written approval of the Australian Minister of Foreign Affairs is
required for transactions involving the control or ownership of assets by
persons or entities linked to terrorist activities and identified by the United
Nations and the Commonwealth of Australia under the Charter of the United
Nations (Anti-terrorism -- Persons and Entities) List, as published from time to
time in the Commonwealth Government Gazette. This includes individuals or
entities linked with the Taliban, Osama bin Laden and other terrorist
organizations. Transactions involving persons published in the Commonwealth
Government Gazette without the permission of the Australian Minister for Foreign
Affairs are a criminal offence.
PROHIBITED TRANSACTIONS
Transactions involving the previous Iraqi regime, including Saddam
Hussein, other members of the regime and their immediate families are prohibited
under the Iraq (Reconstruction and Repeal & Sanctions) Regulations 2003 (Cth)
and transactions involving individuals associated with the regime of former
President of Yugoslavia Slobodan Milosevic and certain ministers and senior
officials of the Government of Zimbabwe are prohibited under the Banking
(Foreign Exchange) Regulations 1959 (Cth). The Reserve Bank of Australia
publishes changes to prohibited parties and variations in the restrictions on
those parties from time to time in the Commonwealth Government Gazette.
TRANSACTIONS WHICH MAY BE APPROVED BY THE RESERVE BANK OF AUSTRALIA
Transactions over A$100,000 involving the Embassy of the Federal
Republic of Yugoslavia, the Consulate-General of the Federal Republic of
Yugoslavia and Narodna Banka Jugoslavije (including Banque Nationale de
Yugoslavie) require prior approval from the Reserve Bank of Australia.
Specific prior approval of the Reserve Bank of Australia or the
Minister for Foreign Affairs must be obtained for certain payments or other
dealings involving or connected in certain ways with Iraq, Zimbabwe, certain
Yugoslav entities or individuals, the Taliban, or associated parties, or other
parties to whom financial sanctions applies.
ERISA CONSIDERATIONS
Subject to the considerations discussed in this section, the US$ notes
are eligible for purchase by employee benefit plans.
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended (ERISA) and Section 4975 of the Code prohibit a pension, profit-sharing
or other employee benefit plan, as well as individual retirement accounts and
certain types of Keogh plans from engaging in certain transactions with persons
that are "parties in interest" under ERISA or "disqualified persons" under
Section 4975 of the Code with respect to these Benefit Plans. A violation of
these "prohibited transaction" rules may result in an excise tax or other
penalties and liabilities under ERISA and the Code for these persons. Title I of
ERISA also requires that fiduciaries of a Benefit Plan subject to ERISA make
investments that are prudent, diversified, except if prudent not to do so, and
in accordance with governing plan documents.
148
Some transactions involving the purchase, holding or transfer of the
US$ notes might be deemed to constitute prohibited transactions under ERISA and
Section 4975 of the Code if assets of the trust were deemed to be assets of a
Benefit Plan. Under a regulation issued by the United States Department of Labor
(the REGULATION), the assets of the trust would be treated as plan assets of a
Benefit Plan for the purposes of ERISA and Section 4975 of the Code only if the
Benefit Plan acquires an "equity interest" in the trust and none of the
exceptions contained in the regulation is applicable. An equity interest is
defined under the regulation as an interest in an entity other than an
instrument which is treated as indebtedness under applicable local law and which
has no substantial equity features. Although there is no specific guidance in
the regulation regarding whether a principal charge-off feature under the
circumstances described herein would constitute a "substantial equity feature,"
the Regulation does state that an instrument will not fail to be treated as
indebtedness merely because it has certain equity features, such as additional
variable interest or conversion rights, that are incidental to the instrument's
primary fixed obligation. Although there can be no assurances in this regard, it
appears, at the time of their initial issuance that the notes should be treated
as debt without substantial equity features for purposes of the Regulation and
that the notes do not constitute equity interests in the trust for purposes of
the Regulation. The debt characterization of the notes could change after their
initial issuance if the trust incurs losses or the rating of US$ notes changes.
The risk of recharacterization is enhanced for the US$ notes if Redraw notes are
issued because the US$ notes are subordinated to the Redraw notes. This risk of
recharacterization is further enhanced for the Class B notes and the Class AB
notes because they are subordinated to the Class A notes.
However, without regard to whether the US$ notes are treated as an
equity interest for purposes of the Regulation, the acquisition or holding of
the notes by or on behalf of a Benefit Plan could be considered to give rise to
a prohibited transaction if the trust, the issuer trustee, the servicer, the
backup servicer, the trust manager, the note trustee, the seller, a swap
provider, the underwriters or the security trustee is or becomes a party in
interest or a disqualified person with respect to these Benefit Plans. In such
case, certain exemptions from the prohibited transaction rules could be
applicable depending on the type and circumstances of the plan fiduciary making
the decision to acquire a note. Included among these exemptions are:
o Prohibited Transaction Class Exemption 96-23, regarding transactions
effected by "in-house asset managers";
o Prohibited Transaction Class Exemption 95-60, regarding transactions
effected by "insurance company general accounts";
o Prohibited Transaction Class Exemption 91-38, regarding investments by
bank collective investment funds;
o Prohibited Transaction Class Exemption 90-1, regarding investments by
insurance company pooled separate accounts; and
o Prohibited Transaction Class Exemption 84-14, regarding transactions
effected by "qualified professional asset managers".
By your acquisition of a US$ note, you shall be deemed to represent and
warrant that either (a) you are not acquiring a US$ note with the assets of a
Benefit Plan or (b) your purchase and holding of the note will not result in a
non-exempt prohibited transaction under Section 406(a) of ERISA or Section 4975
of the Code.
149
Employee benefit plans that are governmental plans, as defined in
Section 3(32) of ERISA, and certain church plans, as defined in Section 3(33) of
ERISA, are not subject to ERISA requirements; however, governmental plans may be
subject to comparable state law restrictions.
If you are a plan fiduciary considering the purchase of any of the US$
notes, you should consult your tax and legal advisors regarding whether the
assets of the Trust would be considered plan assets, the possibility of
exemptive relief from the prohibited transaction rules and other issues and
their potential consequences.
LEGAL INVESTMENT CONSIDERATIONS
The US$ notes will not constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984, because the
originator of the housing loans was not subject to United States state or
federal regulatory authority. Accordingly, some United States institutions with
legal authority to invest in comparably rated securities based on such housing
loans may not be legally authorized to invest in the US$ notes. No
representation is made as to whether the notes constitute legal investments
under any applicable statute, law, rule, regulation or order for any entity
whose investment activities are subject to investment laws and regulations or to
review by any regulatory authorities. You are urged to consult with your counsel
concerning the status of the US$ notes as legal investments for you.
AVAILABLE INFORMATION
Interstar Securitisation Management Pty Limited, as trust manager, has
filed with the SEC a registration statement under the United States Securities
Act of 1933 (SECURITIES ACT) with respect to the US$ notes offered pursuant to
this prospectus. For further information, reference should be made to the
registration statement and amendments thereof and to the exhibits thereto, which
are available for inspection without charge at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies
of the registration statement, including any amendments or exhibits, may be
obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The SEC also maintains a World Wide
Web site which provides on-line access to reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC at the address "http://www.sec.gov".
RATINGS OF THE NOTES
The issuance of the Class A notes and the Class AB notes will be
conditional on obtaining a rating of AAA by S&P and Aaa by Moody's, in the case
of the Class A notes, and AAA by S&P and Aa1 by Moody's, in the case of the
Class AB notes. The issuance of the Class B notes will be conditional on
obtaining a rating of AA- by S&P and Aa3 by Moody's.
You should independently evaluate the security ratings of each class of
notes from similar ratings on other types of securities. A security rating is
not a recommendation to buy, sell or hold securities. A rating does not address
the market price or suitability of the notes for you. A rating may be subject to
revision or withdrawal at any time by the rating agencies. The rating does not
address the expected schedule of principal repayments other than to say that
principal will be returned no later than the final maturity date of the notes.
The ratings of the US$ notes will be based primarily on the creditworthiness of
the housing loans, the subordination provided by the Class AB notes and the
Class B notes with respect to the Redraw notes and the Class A notes
150
and the subordination provided by the Class B notes with respect to the Class AB
notes, the availability of income after payment of interest on the notes and the
trust's expenses, the mortgage insurance policies and title insurance policies,
the creditworthiness of the swap providers and the mortgage insurers and the
foreign currency rating of Australia. The Commonwealth of Australia's current
foreign currency long term debt rating is AAA by S&P and Aaa by Moody's. In the
context of an asset securitisation, the foreign currency rating of a country
reflects, in general, a rating agency's view of the likelihood that cash flow on
the assets in such country's currency will be permitted to be sent outside of
that country. None of the rating agencies have been involved in the preparation
of this prospectus.
PLAN OF DISTRIBUTION
UNDERWRITING
Under the terms and subject to the conditions contained in the
underwriting agreement among the underwriters, the issuer trustee, the servicer
and the trust manager, the issuer trustee has agreed to sell to the
underwriters, and each underwriter severally has agreed to purchase from the
issuer trustee, the class and Principal Amount of the US$ notes set forth
opposite each underwriters' name in the tables below:
PRINCIPAL AMOUNT OF
CLASS A NOTES
UNDERWRITERS OF THE CLASS A NOTES (US$)
--------------------------------- -----
Barclays Capital Inc.................................... $475,000,000
J.P. Morgan Securities Inc. ............................ $475,000,000
Deutsche Bank Securities Inc. .......................... $50,000,000
Total .................................................. $1,000,000,000
PRINCIPAL AMOUNT OF
CLASS AB NOTES
UNDERWRITERS OF THE CLASS AB NOTES (US$)
--------------------------------- -----
Barclays Capital Inc.................................... $24,500,000
J.P. Morgan Securities Inc. ............................ $24,500,000
Deutsche Bank Securities Inc. .......................... $0
Total .................................................. $49,000,000
PRINCIPAL AMOUNT OF
CLASS B NOTES
UNDERWRITERS OF THE CLASS B NOTES (US$)
--------------------------------- -----
Barclays Capital Inc.................................... $8,550,000
J.P. Morgan Securities Inc. ............................ $8,550,000
Deutsche Bank Securities Inc. .......................... $0
Total .................................................. $17,100,000
The underwriting agreement provides that the underwriters are obligated
to purchase all of the US$ notes if any are purchased.
The underwriters propose to offer the Class A notes, the Class AB notes
and the Class B notes initially at the public offering prices on the cover page
of this prospectus and to selling group members at the price less a concession
not in excess of the respective amounts set forth in the following table,
expressed as a percentage of the principal balance of each class of US$ notes.
The underwriters and selling group members may reallow a discount not in excess
of the respective amounts set forth in the following table to other brokers and
dealers. After the initial public offering, the public offering price and
concessions and discounts to brokers and dealers may be changed by the
representative of the underwriters.
151
SELLING REALLOWANCE
CONCESSIONS DISCOUNT
----------- -----------
Class A notes.................................. 0.072% 0.018%
Class AB notes................................. 0.072% 0.018%
Class B notes.................................. 0.072% 0.018%
The trust manager estimates that the out-of-pocket expenses for this
offering will be approximately US$683,253.40.
The trust manager has agreed to indemnify the underwriters against
civil liabilities under the Securities Act, or contribute to payments which the
underwriters may be required to make in that respect.
The total underwriting discounts and commissions for the US$ notes will
be equal to US$1,279,320. The underwriting discounts and commissions will be
paid separately by Interstar Securities (Australia) Pty Limited and not from the
proceeds of the issuance of the US$ notes.
The underwriters may engage in over-allotment, stabilizing
transactions, syndicate covering transactions and penalty bids in accordance
with Regulation M under the Exchange Act.
o Over-allotment involves syndicate sales in excess of the offering
size, which creates a syndicate short position.
o Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified
maximum.
o Syndicate covering transactions involve purchases of the US$ notes in
the open market after the distribution has been completed in order to
cover syndicate short positions.
o Penalty bids permit the underwriters to reclaim a selling concession
from a syndicate member when the US$ notes originally sold by a
syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions.
Stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the US$ notes to be higher than it would otherwise
be in the absence of these transactions. These transactions, if commenced, may
be discontinued at any time.
OFFERING RESTRICTIONS
THE UNITED KINGDOM
The US$ notes have only been offered or sold and, prior to the expiry
of six months from the closing date, will only be offered or sold in or from the
United Kingdom: (a) to persons (i) whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments, as principal or agent,
for the purposes of their businesses; or (ii) to persons who it is reasonable to
expect will acquire, hold, manage or dispose of investments, as principal or
agent, for the purposes of their businesses; or (iii) otherwise in circumstances
that have not resulted and will not result in an offer to the public under the
Public Offers of Securities Regulations 1995 (as amended); and (b) in compliance
with all applicable provisions of the Financial Services and Markets Act 2000
(FISMA), and rules and regulations made thereunder with respect to anything done
in relation to the US$ notes in, from or otherwise involving the United Kingdom.
Any invitation or inducement to engage in investment activity, within the
meaning of Section 21 of FISMA, will only be communicated or caused to be
communicated in circumstances when Section 21 of
152
FISMA does not apply, including to persons authorized under FISMA or otherwise
any professional with experience on matters relating to investments and
qualifying as investment professionals under Article 19 or to high net worth
persons under Article 49 of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2001, as amended or to any other person to whom an
invitation or inducement to enter into investment activity of this type may
otherwise lawfully be communicated.
Neither this prospectus nor the US$ notes have been, or will be,
available to other categories of persons in the United Kingdom and no one
falling outside such categories is entitled to rely on, and must not act on, any
information in this prospectus. The communication of this prospectus to any
person in the United Kingdom other than the categories stated above is
unauthorized and may contravene FISMA.
AUSTRALIA
No offering circular, prospectus or other disclosure document in
relation to any notes has been lodged with the Australian Securities and
Investments Commission. The US$ notes may not, in connection with their initial
distribution, be offered or sold, directly or indirectly, in the Commonwealth of
Australia, its territories or possessions, or to any resident of Australia.
Each underwriter severally has agreed that it:
o has not, directly or indirectly, offered for issue or sale or invited
applications for the issue of or for offers to purchase nor has it
sold the US$ notes;
o will not, directly or indirectly, offer for issue or sale or invite
applications for the issue of or for offers to purchase nor will it
sell the US$ notes; and
o has not distributed and will not distribute any draft, preliminary or
definitive offering circular, or any advertisement or other offering
material,
in Australia, its territories or possessions unless:
o the amount payable for the US$ notes on acceptance of the offer by
each offeree or invitee is a minimum amount of A$500,000, or its
equivalent in another currency -- disregarding amounts, if any, lent
by the issuer trustee or other person offering the notes or any
associate of them -- or the offer or invitation is otherwise an offer
or invitation for which no disclosure is required to be made under
Part 6D.2 of the Corporations Act 2001 of Australia; and
o the offer, invitation or distribution complies with all applicable
laws, regulations and directives in relation to the offer, invitation
or distribution and does not require any document to be lodged with
the Australian Securities and Investments Commission.
In addition, each underwriter severally has agreed that, in connection
with the primary distribution of the US$ notes, it will not sell any US$ notes
to any person if, at the time of such sale, the employees of the underwriter
directly involved in the sale know, or have reasonable grounds to suspect that,
as a result of such sale, such US$ notes or any interest in such US$ notes will
be, or will later be acquired, directly or indirectly, by an offshore associate
of the issuer
153
trustee--as identified on a list provided by the trust manager--other than in
the capacity of a dealer, manager or underwriter in relation to the placement of
the US$ notes or in the capacity of a clearing house, custodian, funds manager
or responsible entity of a registered scheme.
An OFFSHORE ASSOCIATE OF THE ISSUER TRUSTEE means an associate (within
the meaning of section 128F of the Tax Act) of the issuer trustee that is either
a non-resident of Australia that does not acquire the US$ notes in carrying on a
business at or through a permanent establishment in Australia or, alternatively,
a resident of Australia that acquires the US$ notes in carrying on a business at
or through a permanent establishment outside Australia.
Each underwriter severally has agreed that it must offer the US$ notes
for which it subscribes for sale within 30 days of the issue of those US$ notes.
Such offer must only be by one of the following means, or a combination thereof:
o as a result of negotiations being initiated by the underwriter in
electronic form on Reuters or the electronic information system made
available to its subscribers by Bloomberg, L.P., specifying in such
offer the name of the issuer and the price at which the US$ notes are
offered for sale; or
o by the underwriter offering those US$ notes for sale to at least 10
persons, each of whom must be:
o carrying on a business of providing finance, or investing or
dealing in securities, in the course of operating in the
financial markets; and
o not known by the employees of the underwriter directly involved
in the sale to be an associate of any of the others; or
o by the underwriter offering those US$ notes as a result of the US$
notes being accepted for listing on a stock exchange where the issuer
trustee has previously entered into an agreement with the underwriter
in relation to the placement of the US$ notes requiring the issuer
trustee to seek such listing; or
o by the underwriter offering those US$ notes to at least 100 persons
who it would be reasonable to regard as either having acquired
instruments similar to the US$ notes in the past or as likely to be
interested in acquiring US$ notes.
154
GENERAL INFORMATION
LISTING
An application will be made to list the US$ notes on the Australian
Stock Exchange.
AUTHORIZATION
The issuer trustee has obtained all necessary consents, approvals and
authorizations in connection with the issue and performance of the US$ notes.
The issue of the US$ notes has been authorized by the resolutions of the board
of directors of Perpetual Trustees Victoria Limited passed on March 8, 2004.
LITIGATION
The issuer trustee is not, and has not been, involved in any litigation
or arbitration proceedings that may have, or have had during the twelve months
preceding the date of this prospectus, a significant effect on its financial
position nor, so far as it is aware, are any such litigation or arbitration
proceedings pending or threatened.
EUROCLEAR AND CLEARSTREAM, LUXEMBOURG
The US$ notes have been accepted for clearance through Euroclear and
Clearstream, Luxembourg with the common code number 018783746, CUSIP 46071NAA4
and ISIN US46071NAA46 for the Class A notes, common code number 018783754, CUSIP
46071NAB2 and ISIN US46071NAB29 for the Class AB notes and common code number
018783789, CUSIP 46071NAC0 and ISIN US46071NAC02 for the Class B notes.
ANNOUNCEMENT
By distributing or arranging for the distribution of this prospectus to
the underwriters and the persons to whom this prospectus is distributed, the
issuer trustee announces to the underwriters and each such person that:
o the US$ notes will initially be issued in the form of registered,
book-entry notes and will be registered in the name of Cede &
Co., as nominee of DTC;
o in connection with the issue, DTC will confer rights in the US$
notes to the noteholders and will record the existence of those
rights; and
o as a result of the issue of the US$ notes in this manner, these
rights will be created.
155
LEGAL MATTERS
Mayer, Brown, Rowe & Maw LLP, New York, New York, will pass upon some
legal matters with respect to the US$ notes, including the material U.S. federal
income tax matters, for Interstar Securitisation Management Pty Limited. Allens
Arthur Robinson, Sydney, Australia, will pass upon some legal matters, excluding
any Australian tax matters, with respect to the US$ notes for Interstar
Securitisation Management Pty Limited. KPMG will pass upon the Australian tax
matters with respect to the US$ notes for Interstar Securitisation Management
Pty Limited. McKee Nelson LLP will act as United States legal counsel to the
underwriters.
156
GLOSSARY
ACCRUED INTEREST ADJUSTMENT...... means, in relation to the seller, the amount
equal to any interest and fees accrued on the
housing loans purchased from the seller up
to, but excluding, the closing date and which
were unpaid as of the close of business on
the closing date.
AGGREGATE PRINCIPAL LOSS AMOUNT.. means, in relation to a Collection Period,
the aggregate amount of Principal Losses
which are attributable to principal in
relation to the housing loans for that
Collection Period.
APPROVED BANK.................... means a bank which has a short term rating of
A-1+ from S&P and P-1 from Moody's and which
is approved by the trust manager in writing.
AUTHORIZED INVESTMENTS........... means any investments which at their date of
acquisition are:
o housing loans secured by mortgages, those
mortgages and any other related securities
and rights;
o bills, promissory notes or other
negotiable instruments accepted, drawn or
endorsed by an Approved Bank;
o cash and/or deposits with an Approved Bank
or deposits with, or the acquisition of
certificates of deposit or any other debt
security issued by an Approved Bank;
o loan securities issued, secured, or
guaranteed by the Commonwealth of
Australia or any State or Territory within
the Commonwealth of Australia; and
o any mortgage-backed security issued by any
entity,
which satisfy the following conditions:
o unless otherwise advised in writing by
each rating agency:
o each proposed investment falling
within bullet points 2, 3 and 4 must
have a credit rating issued by S&P of
A-1+ or AAA and by Moody's of P-1 or
Aaa;
o each proposed investment falling
within bullet point 5 must have a
credit rating issued by S&P
157
of AAA and by Moody's of Aaa;
o each proposed investment falling
within bullet points 2, 3 and 4 must
mature by the earlier of the
following dates:
o the payment date following the
date on which it was acquired;
or
o such other date as the issue
trustee and the trust manager
may determine to be necessary to
enable the issuer trustee to
have sufficient cash to meet any
expenses of the trust which may
be payable prior to that payment
date;
o unless the series notice
otherwise provides, all
Authorized Investments must be
denominated in Australian
currency and held in Australia;
and
o all Authorized Investments must
be held in the name of the
issuer trustee or in the name of
such other person or persons as
approved by the issuer trustee
from time to time.
AVAILABLE INCOME................. see page 74.
BANK BILL RATE................... means as at any date the rate per cent per
annum being the average of the buying and
selling rates for a three-month bill or, in
the case of the first Interest Period, the
linear interpolation of the average of the
buying and selling rates for three and a
four-month bill, in each case quoted on the
page designated "BBSW" of the Reuters Monitor
System at or about 10.30 am, Melbourne time,
on that date by each person so quoting, but
not less than five, and rounding the
resultant figure upwards to four decimal
places, provided that if in respect of any
date the Bank Bill Rate cannot be determined
because fewer than five persons have quoted
rates or a rate is not displayed for a term
equivalent to that period, then the Bank Bill
Rate for that date shall mean such rate as
determined by a financial advisor nominated
by the trust manager or by the trust manager
having regard to comparable indices then
available. In the event that any such date is
not a business day, then the Bank Bill Rate
applicable on that date shall be deemed to be
the Bank Bill Rate which is applicable on the
business day next succeeding that date. A
certificate signed by a financial advisor
nominated by the trust manager or the trust
manager certifying as to the Bank Bill Rate
on any
158
date shall be final and conclusive evidence
thereof in the absence of manifest error.
BENEFIT PLAN..................... means an employee benefit plan as defined in
Section 3(3) of ERISA that is subject to
Title I of ERISA, a plan described in Section
4975(e)(1) of the Code or an entity deemed to
hold plan assets of any of the foregoing by
reason of an employee benefit plan's or
plan's investment in the entity.
CARRYOVER CHARGE-OFF............. see page 82.
CHARGE-OFF....................... see page 82.
CLASS A A$ EQUIVALENT............ means, in relation to an amount denominated
or to be denominated in US$:
o prior to the termination of the Class A
currency swap, the amount converted to and
denominated in A$ at the rate of exchange
set forth in the Class A currency swap for
the exchange of United States dollars for
Australian dollars; and
o after the termination of the Class A
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 A
notes to be paid from or by reference to
such amount.
CLASS A A$ INTEREST AMOUNT....... means, in relation to a payment date, the
amount in A$ calculated as follows:
o on a daily basis at a rate equal at the
Bank Bill Rate on that day plus a margin
set forth in the Class A currency swap
that will increase after the Step-Up
Margin Date;
o on the Class A A$ Equivalent of the
Principal Amount of the Class A notes as
at the first day of the Interest Period
ending on that payment date; and
o on the basis of the actual number of days
in the relevant payment period and a year
of 365 days,
together with any unpaid Class A A$ Interest
Amount in respect of previous payment dates.
159
CLASS AB A$ EQUIVALENT .......... means, in relation to an amount denominated
or to be denominated in US$:
o prior to the termination of the Class AB
currency swap, the amount converted to and
denominated in A$ at the rate of exchange
set forth in the Class AB currency swap
for the exchange of United States dollars
for Australian dollars; and
o after the termination of the Class AB
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 AB
notes to be paid from or by reference to
such amount.
CLASS AB A$ INTEREST AMOUNT...... means, in relation to a payment date, the
amount in A$ calculated as follows:
o on a daily basis at a rate equal at the
Bank Bill Rate on that day plus a margin
set forth in the Class AB currency swap
that will increase after the Step-Up
Margin Date;
o on the Class AB A$ Equivalent of the
Principal Amount of the Class AB notes as
at the first day of the Interest Period
ending on that payment date; and
o on the basis of the actual number of days
in the relevant payment period and a year
of 365 days,
together with any unpaid Class AB A$ Interest
Amount in respect of previous payment dates.
CLASS B A$ EQUIVALENT............ means, in relation to an amount denominated
or to be denominated in US$:
o prior to the termination of the Class B
currency swap, the amount converted to and
denominated in A$ at the rate of exchange
set forth in the Class B currency swap for
the exchange of United States dollars for
Australian dollars; and
o after the termination of the Class B
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 B
notes to be paid from or
160
by reference to such amount.
CLASS B A$ INTEREST AMOUNT....... means, in relation to a payment date, the
amount in A$ calculated as follows:
o on a daily basis at a rate equal at the
Bank Bill Rate on that day plus a margin
set forth in the Class B currency swap
that will increase after the Step-Up
Margin Date;
o on the Class B A$ Equivalent of the
Principal Amount of the Class B notes as
at the first day of the Interest Period
ending on that payment date; and
o on the basis of the actual number of days
in the relevant payment period and a year
of 365 days,
together with any unpaid Class B A$ Interest
Amount in respect of previous payment dates.
CODE............................. see page 136.
COLLECTION PERIOD................ see page 72.
CONSUMER CREDIT LEGISLATION...... means any legislation relating to consumer
credit, including the Credit Act of any
Australian jurisdiction, the Consumer Credit
Code (VIC) 1996 and any other equivalent
legislation of any Australian jurisdiction.
DETERMINATION DATE............... see page 72.
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 73.
INCOME SHORTFALL................. see page 74.
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:
161
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 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,
162
under any applicable legislation; or
o anything analogous to an event referred to
in the seven preceding paragraphs or
having a substantially similar effect
occurs with respect to the relevant
corporation.
INTEREST PERIOD.................. see page 72.
ISDA............................. means the International Swaps and Derivatives
Association, Inc.
ISDA DEFINITIONS................. means the 2000 ISDA definitions, as amended
and updated as at the Note Issue Date.
ISSUER TRUSTEE'S DEFAULT......... means:
o an Insolvency Event has occurred and is
continuing in relation to the issuer
trustee;
o any action is taken in relation to the
issuer trustee which causes the rating of
any notes to be downgraded or withdrawn;
o the issuer trustee, or any employee or
officer of the issuer trustee, breaches
any obligation or duty imposed on the
issuer trustee under any transaction
document, any fixed-floating rate swap,
the Class A currency swap, the Class AB
currency swap or the Class B currency swap
in relation to the trust where the trust
manager reasonably believes it may have a
Material Adverse Effect and the issuer
trustee fails or neglects after 30 days'
notice from the trust manager to remedy
that breach;
o the issuer trustee merges or consolidates
with another entity without ensuring that
the resulting merged or consolidated
entity assumes the issuer trustee's
obligations under the transaction
documents; or
o there is a change in control of the issuer
trustee from that existing on the date of
the master trust deed unless approved by
the trust manager.
LIBOR............................ means, in relation to any Interest Period for
US $notes, the rate applicable for deposits
in U.S. dollars for a period of 3 months or,
in the case of the first Interest Period, the
linear interpolation of the rates applicable
for deposits in U.S. dollars for 3 and 4
months which appears on the Telerate Page
3750 as of 11.00 am,
163
London time, on the relevant rate reset date.
If such rate does not appear on the Telerate
Page 3750, the rate for that Interest Period
will be determined as if the issuer trustee
and the calculation agent had specified
USD-LIBOR-REFERENCE BANKS as the applicable
Floating Rate Option under the ISDA
Definitions. USD-LIBOR- Reference Banks means
that the rate for an Interest Period for US$
notes will be determined on the basis of the
rates at which deposits in U.S. dollars are
offered by four major banks in the London
interbank market agreed to by the calculation
agent and the currency swap provider (the
REFERENCE BANKS) at approximately 11.00 am,
London time, on the relevant rate reset date
to prime banks in the London interbank market
for a period of 3 months commencing on the
first day of the Interest Period and in a
Representative Amount, as defined in the ISDA
Definitions. The calculation agent will
request the principal London office of each
of the Reference Banks to provide a quotation
of its rate. If at least two such quotations
are provided by Reference Banks to the
calculation agent, the rate for that Interest
Period will be the arithmetic mean of the
quotations. If fewer than two quotations are
provided by Reference Banks to the
calculation agent following the calculation
agent's request, the rate for that Interest
Period will be the arithmetic mean of the
rates quoted by four major banks in New York
City, selected by the calculation agent and
the currency swap provider, at approximately
11.00 am, New York City time, on that rate
reset date for loans in U.S. dollars to
leading European banks for a period of 3
months commencing on the first day of the
Interest Period and in a Representative
Amount. If no such rates are available in New
York City, then the rate for such Interest
Period will be the most recently determined
rate in accordance with this definition.
LIQUID AUTHORIZED INVESTMENTS.... as at any date means any of the following
Authorized Investments:
o bills, promissory notes or other
negotiable instruments accepted drawn or
endorsed by an Approved Bank;
o cash and/or deposits with an Approved
Bank, 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 Government of Australia
or any State or Territory
164
within the Commonwealth of Australia; and
o any other Authorized Investments approved
by the rating agencies.
LIQUIDATION LOSSES............... means, with respect to any housing loan that
becomes a liquidated loan during a Collection
Period, the Unpaid Balance of that liquidated
loan, after the application of all
Liquidation Proceeds relating to that
liquidated loan, including any enforcement
expenses in respect of that liquidated loan.
LIQUIDATION PROCEEDS............. means, in relation to a housing loan, the
amount received by or on behalf of the issuer
trustee in connection with the liquidation of
such housing loan including, without
limitation:
o proceeds arising from the enforcement of
the mortgage in relation to that housing
loan and sale of the land subject to such
mortgage;
o proceeds arising from the enforcement of
any loan security in relation to that
housing loan;
o proceeds of any claim under the relevant
mortgage insurance policy or title
insurance policy; and
o proceeds arising from any taking or
compulsory acquisition of the land in
relation to such housing loan by any
government agency.
LIQUIDITY PURPOSES............... see page 82.
LOW DOC LOAN..................... see page 56.
LVR.............................. means in relation to a housing loan, the
ratio, expressed as a percentage, which the
outstanding amount of the housing loan
secured or to be secured by the related
mortgage bears to the value of the land
mortgaged or to be mortgaged at the date of
the valuation of the subject property.
MATERIAL ADVERSE EFFECT.......... means an event which will materially and
adversely affect the amount or the timing of
a payment to a noteholder.
MORTGAGE PRINCIPAL REPAYMENTS.... see page 78.
MORTGAGEES....................... see page 104.
165
NOTEHOLDER MORTGAGEES............ means the Redraw noteholders and the note
trustee, on behalf of the Class A noteholders
and the Class AB noteholders.
PAYMENT DATE..................... see page 72.
PREFUNDING ACCOUNT............... see page 38.
PRESCRIBED MINIMUM LEVEL......... see page 73.
PRIMARY EXPENSES................. see page 74.
PRINCIPAL AMOUNT................. means, on any date in relation to a note, the
Initial Principal Amount of that note minus
the aggregate of repayments of principal made
in respect of the note on or before that
date.
PRINCIPAL LOSSES................. means, for any Collection Period, the amount
of those Liquidation Losses which is
attributable to principal, calculated on the
basis that all Liquidation Proceeds actually
received by or on behalf of the issuer
trustee in relation to a housing loan are
applied first against interest, fees and
other enforcement expenses relating to that
housing loan and then against the principal
relating to that housing loan.
RECOVERY AMOUNT.................. see page 77.
SECURED MONIES................... means all money which the issuer trustee is
or at any time may become actually or
contingently liable to pay to or for the
account of any Mortgagee for any reason
whatsoever under or in connection with a
transaction document, any fixed-floating rate
swap, the Class A currency swap, the Class AB
currency swap or the Class B currency swap.
SERVICER TRANSFER EVENT.......... see page 116.
STEP-UP MARGIN DATE.............. means the payment date falling in March 2009.
TAX ACT.......................... see page 140.
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
166
its rights under the security trust deed
after the occurrence of an event of
default under the security trust deed; or
o at any time after all creditors of the
trust have been repaid in full, the
business day immediately following that
date.
THRESHOLD REQUIREMENTS........... see page 81.
TRUST MANAGER'S DEFAULT.......... means:
o the trust manager fails to make any
payment required by it within the time
period specified in a transaction
document, any fixed-floating rate swap,
the Class A currency swap, the Class AB
currency swap or the Class B currency
swap, and that failure is not remedied
within 5 business days of receipt from the
issuer trustee of notice of that failure;
o an Insolvency Event has occurred and is
continuing in relation to the trust
manager;
o the trust manager breaches any obligation
or duty imposed on the trust manager under
the master trust deed, any other
transaction document, any fixed-floating
rate swap, the Class A currency swap, the
Class AB currency swap or the Class B
currency swap, or any other deed,
agreement or arrangement entered into by
the trust manager under the master trust
deed in relation to the trust, the issuer
trustee reasonably believes that such
breach has a Material Adverse Effect and
the breach is not remedied within 30 days'
notice being given by the issuer trustee
to the trust manager, except in the case
of reliance by the trust manager on the
information provided by, or action taken
by, the servicer, or if the trust manager
has not received information from the
servicer which the trust manager requires
to comply with the obligation or duty; or
o a representation, warranty or statement by
or on behalf of the trust manager in a
transaction document, any fixed-floating
rate swap, the Class A currency swap, the
Class AB currency swap or the Class B
currency swap, or a document provided
under or in connection with a transaction
document, any fixed-floating rate swap,
the Class A currency swap, the Class AB
currency swap or the Class B currency swap
is not true in a material respect or is
misleading when repeated and is not
remedied to
167
the issuer trustee's reasonable
satisfaction within 90 days after notice
from the issuer trustee where, as
determined by the issuer trustee, it has a
Material Adverse Effect.
UNPAID BALANCE................... means, at any time, the unpaid principal
amount of the housing loan plus the unpaid
amount of all finance charges, interest
payments and other amounts accrued on or
payable under or in connection with the
housing loan or the related mortgage at that
time.
VOTING MORTGAGEES................ see page 107.
168
================================================================================
INTERSTAR MILLENNIUM SERIES 2004-2G TRUST
CLASS A MORTGAGE BACKED FLOATING RATE NOTES
CLASS AB MORTGAGE BACKED FLOATING RATE NOTES
CLASS B MORTGAGE BACKED FLOATING RATE NOTES
----------------------------
PROSPECTUS
----------------------------
UNDERWRITERS OF THE CLASS A NOTES, THE CLASS AB NOTES AND THE CLASS B NOTES
BARCLAYS CAPITAL JPMORGAN
DEUTSCHE BANK SECURITIES
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 June 7, 2004, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealer's obligation to deliver
a prospectus when acting as an underwriter and with respect to unsold allotments
or subscriptions.
================================================================================