This Prospectus comprises a base prospectus for the purposes of Article 8 of the Prospectus Regulation and the UK Prospectus Regulation, replaces and supersedes the Prospectus dated 20 April 2022 describing the Programme and has been published in accordance with the prospectus rules made under the FSMA. This Prospectus is not a prospectus for the purposes of section 12(a)(2) of the Securities Act or any other provision or order under the Securities Act.

This Prospectus has not been, nor will be, lodged with the Australian Securities and Investments Commission and is not a 'prospectus' or other 'disclosure document' for the purposes of the Corporations Act 2001 (Cth) (Corporations Act). See the section "Subscription and Sale and Transfer and Selling Restrictions" in this Prospectus.

 

The Issuer accepts responsibility for the information contained in this Prospectus, the Applicable Final Terms for each Tranche of Covered Bonds (or, in the case of a Tranche of Exempt Covered Bonds, the Applicable Pricing Supplement) issued under the Programme and any document incorporated by reference into this Prospectus. The Covered Bond Guarantor only accepts responsibility for the information contained in the sections entitled "Risk Factors - Risk factors related to the Covered Bond Guarantor", "Structure Overview - Programme - Covered Bond Guarantee", "General Description of the Programme - Covered Bond Guarantor", "General Description of the Programme - Covered Bond Guarantee", Conditions 3(b) and 9(b) in the section entitled "Terms and Conditions of the Covered Bonds", "The BOQ Covered Bond Trust - Perpetual Corporate Trust Limited", "Overview of the Principal Documents - The Covered Bond Guarantee", "Credit Structure - Covered Bond Guarantee", the Covered Bond Guarantee as referenced in (iii) of "General Information - Documents Available", the second paragraph in "General Information - Significant or Material Change" and the second paragraph in "General Information - Litigation" of this Prospectus and paragraphs 2 and 16 in the Final Terms (or, in the case of Exempt Covered Bonds, the applicable Pricing Supplement) for each Tranche of Covered Bonds issued under the Programme. To the best of the knowledge of the Issuer and the Covered Bond Guarantor, only in relation to the information for which it is responsible, the information contained in this Prospectus is in accordance with the facts and this Prospectus makes no omission likely to affect its import. 

Copies of each set of Final Terms issued subject to the provisions described in this Prospectus and any supplement thereto (in the case of Covered Bonds to be admitted to the Official List) will be available from the registered office of the Issuer and (in the case of Covered Bonds to be admitted to the Official List, to listing on any other regulated or unregulated market or stock exchange and also all unlisted Covered Bonds) from the specified office set out below of each of the Paying Agents (as defined below). Final Terms relating to the Covered Bonds which are admitted to trading on the main market of the London Stock Exchange will be available for inspection on the website of the Regulatory News Service operated by the London Stock Exchange at www.londonstockexchange.com/exchange/news/market news/market-news-home.html.

This Prospectus is to be read in conjunction with all documents which are deemed to be incorporated herein by reference (see "Documents Incorporated by Reference" below).  This Prospectus must, save as specified herein, be read and construed on the basis that such documents are so incorporated and form part of this Prospectus. Other than in relation to the documents which are deemed to be incorporated by reference (see "Documents Incorporated by Reference" below), the information on the websites to which this Prospectus refers does not form part of this Prospectus and has not been scrutinised or approved by the FCA.

The information contained in this Prospectus was obtained from the Issuer and other sources (identified in this Prospectus), but no assurance can be given by any other party to the Programme Documents (in respect of information obtained from the Issuer) as to the accuracy or completeness of this information.  Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Arranger, the Dealers or any other party to the Programme Documents (other than in respect of the information for which it accepts responsibility as indicated above) as to the accuracy or completeness of the information contained or incorporated in this Prospectus or any other information provided by a party to the Programme Documents in connection with the Programme.  None of the parties to the Programme Documents (other than in respect of the information for which it accepts responsibility as indicated above) accept any liability in relation to the information contained or incorporated by reference in this Prospectus or any other information provided by the Issuer in connection with the Programme.

No person is or has been authorised by any party to the Programme Documents to give any information or to make any representation not contained in or not consistent with this Prospectus or any other information supplied in connection with the Programme or the Covered Bonds and, if given or made, such information or representation must not be relied upon as having been authorised by such party.

Neither this Prospectus nor any other information supplied in connection with the Programme or any Covered Bonds (i) is intended to provide the basis of any credit or other evaluation or (ii) should be considered as a recommendation by any party to the Programme Documents that any recipient of this Prospectus or any other information supplied in connection with the Programme or any Covered Bonds should purchase any Covered Bonds.  Each investor contemplating purchasing any Covered Bonds should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and/or the Covered Bond Guarantor.  Neither this Prospectus nor any other information supplied in connection with the Programme or the issue of any Covered Bonds constitutes an offer or invitation by or on behalf of any party to the Programme Documents to any person to subscribe for or to purchase any Covered Bonds.

Neither the delivery of this Prospectus nor the offering, sale or delivery of any Covered Bonds will in any circumstances imply that the information contained herein concerning the Issuer and/or the Covered Bond Guarantor is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Programme is correct as of any time subsequent to the date indicated in the document containing the same.  All parties to the Programme Documents (other than the Issuer and the Covered Bond Guarantor) expressly do not undertake to review the financial condition or affairs of the Issuer or the Covered Bond Guarantor during the life of the Programme or to advise any investor in the Covered Bonds of any information coming to their attention.  Investors should review, inter alia, the most recently published documents incorporated by reference into this Prospectus when deciding whether or not to purchase any Covered Bonds.

The Covered Bonds in bearer form are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to United States persons, except in certain transactions permitted by U.S. tax regulations and the Securities Act (see "Subscription and Sale and Transfer and Selling Restrictions" below).  Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986 and the U.S. Treasury regulations promulgated thereunder.

MiFID II PRODUCT GOVERNANCE / TARGET MARKET - The Applicable Final Terms in respect of any Covered Bonds (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement) may include a legend entitled "MiFID II Product Governance" which will outline the target market assessment in respect of the Covered Bonds and which channels for distribution of the Covered Bonds are appropriate. Any person subsequently offering, selling or recommending the Covered Bonds (a distributor) should take into consideration the target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Covered Bonds (by either adopting or refining the target market assessment) and determining appropriate distribution channels.

A determination will be made in relation to each issue of Covered Bonds about whether, for the purpose of the MiFID Product Governance rules under EU Delegated Directive 2017/593 (the MiFID Product Governance Rules), any Dealer subscribing for any Covered Bonds is a manufacturer in respect of such Covered Bonds, but otherwise neither the Arranger nor the Dealers nor any of their respective affiliates will be a manufacturer for the purpose of the MIFID Product Governance Rules.

UK MiFIR PRODUCT GOVERNANCE / TARGET MARKET - The Final Terms in respect of any Covered Bonds (or Pricing Supplement, in the case of Exempt Covered Bonds) may include a legend entitled "UK MiFIR Product Governance" which will outline the target market assessment in respect of the Covered Bonds and which channels for distribution of the Covered Bonds are appropriate. Any person subsequently offering, selling or recommending the Covered Bonds (a distributor) should take into consideration the target market assessment; however, a distributor subject to the FCA Handbook Product Intervention and Product Governance Sourcebook (the UK MiFIR Product Governance Rules) is responsible for undertaking its own target market assessment in respect of the Covered Bonds (by either adopting or refining the target market assessment) and determining appropriate distribution channels.

A determination will be made in relation to each issue about whether, for the purpose of the UK MiFIR Product Governance Rules, any Dealer subscribing for any Covered Bonds is a manufacturer in respect of such Covered Bonds, but otherwise neither the Arranger nor the Dealers nor any of their respective affiliates will be a manufacturer for the purpose of the UK MiFIR Product Governance Rules.

PROHIBITION OF SALES TO EEA RETAIL INVESTORS - The Covered Bonds are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the EEA. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II; (ii) a customer within the meaning of Directive (EU) 2016/97 (the Insurance Distribution Directive), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in the Prospectus Regulation. Consequently no key information document required by Regulation (EU) No 1286/2014 (as amended, the PRIIPs Regulation) for offering or selling the Covered Bonds or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Covered Bonds or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPS Regulation.

PROHIBITION OF SALES TO UK RETAIL INVESTORS - The Covered Bonds are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the United Kingdom. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the EUWA; or (ii) a customer within the meaning of the provisions of the FSMA and any rules or regulations made under the FSMA to implement Directive (EU) 2016/97, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA; or (iii) not a qualified investor as defined in Article 2 of Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the EUWA. Consequently no key information document required by Regulation (EU) No 1286/2014 as it forms part of domestic law by virtue of the EUWA (the UK PRIIPs Regulation) for offering or selling the Covered Bonds or otherwise making them available to retail investors in the UK has been prepared and therefore offering or selling the Covered Bonds or otherwise making them available to any retail investor in the UK may be unlawful under the UK PRIIPs Regulation.

BENCHMARKS REGULATIONS - Amounts payable on certain Floating Rate Covered Bonds issued under the Programme may be calculated by reference to EURIBOR, Compounded Daily SONIA, HIBOR, CDOR, BBSW Rate, SIBOR, BKBM or NIBOR, as specified in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement). As at the date of this Prospectus, (i) Refinitiv Benchmark Services (UK) Limited (as the administrator of CDOR) are included in the register of administrators and benchmarks established and maintained by the FCA (the UK Benchmarks Register)  pursuant to Article 36 of Regulation (EU) No 2016/1011 as it forms part of domestic law by virtue of the EUWA (the UK Benchmarks Regulation) but not in the register of administrators and benchmarks established and maintained by ESMA (the EU Benchmarks Register) pursuant to Article 36 of the Regulation (EU) No. 2016/1011(the EU Benchmarks Regulation), (ii) European Money Markets Institute (as administrator of EURIBOR) is included in the EU Benchmarks Register and the UK Benchmarks Register, (iii) ABS Benchmarks Administration Co Pte. Ltd. (as administrator of SIBOR), Norske Finansielle Referanser AS (as administrator of NIBOR) and ASX Benchmarks Limited (as administrator of the BBSW Rate) are included in the EU Benchmarks Register but not the UK Benchmarks Register. As at the date of this Prospectus, the administrators of SONIA, CDOR, HIBOR and BKBM do not appear on ESMA's register of administrators and benchmarks under Article 36 of the EU Benchmarks Regulation. As far as the Issuer is aware, (i) SONIA does not fall within the scope of the EU Benchmarks Regulation, and (ii) the transitional provisions in Article 51 of the EU Benchmarks Regulation apply, such that each of Refinitiv Benchmark Services (UK) Limited (as administrator of CDOR), the Treasury Markets Association (as administrator of HIBOR) and New Zealand Financial Markets Association (as administrator of BKBM) is not currently required to obtain recognition, endorsement or equivalence).

SECTION 309B NOTIFICATION - In connection with Section 309B of the Securities and Futures Act 2001 of Singapore (the SFA) and the Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore (the CMP Regulations 2018), the Issuer has determined, and hereby notifies all relevant persons as defined in Section 309A(1) of the SFA, unless otherwise stated in the Applicable Final Terms in respect of any Covered Bonds (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement), that all Covered Bonds issued or to be issued under the Programme are classified as capital markets products other than prescribed capital markets products (as defined in the CMP Regulations 2018) and Specified Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy any Covered Bonds in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction.  The distribution of this Prospectus and the offer or sale of Covered Bonds may be restricted by law in certain jurisdictions.  No party to the Programme Documents represents that this Prospectus may be lawfully distributed, or that any Covered Bonds may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering.  In particular, no action has been taken by any party to the Programme Documents which would permit a public offering of any Covered Bonds or distribution of this Prospectus in any jurisdiction where action for that purpose is required.  Accordingly, no Covered Bonds may be offered or sold, directly or indirectly, and neither this Prospectus nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations.  Persons into whose possession this Prospectus or any Covered Bonds may come must inform themselves about, and observe, any such restrictions on the distribution of this Prospectus and the offering and sale of Covered Bonds.  In particular, there are restrictions on the distribution of this Prospectus and the offer or sale of Covered Bonds in the United States, Australia, the EEA, the UK, the Netherlands, Norway, Denmark, Sweden and Switzerland, Japan, Singapore, and Hong Kong, see "Subscription and Sale and Transfer and Selling Restrictions".

Credit ratings in respect of the Covered Bonds or the Issuer are for distribution only to persons who are not a "retail client" within the meaning of section 761G of the Corporations Act and are also sophisticated investors, professional investors or other investors in respect of whom disclosure is not required under Part 6D.2 of the Corporations Act and, in all cases, in such circumstances as may be permitted by acceptable law in any jurisdiction in which an investor may be located. Anyone who is not such a person is not entitled to receive this Prospectus and anyone who receives this Prospectus must not distribute it to any person who is not entitled to receive it.

All references in this document to "Australian Dollar", "AUD" and "A$" refer to the lawful currency for the time being of Australia, references to "US$", "U.S. dollars" are to the lawful currency of the United States of America, references to "Sterling" and "£" are to the lawful currency of the United Kingdom and references to "euro" and "€" refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty on the functioning of the European Union.

In connection with the distribution of any Covered Bonds (other than A$ Registered Covered Bonds), the Dealer or Dealers (if any) acting as the stabilising manager(s) (or persons acting on behalf of any stabilising manager(s)) as named in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement) may over-allot Covered Bonds or effect transactions with a view to supporting the market price of the Covered Bonds and/or any associated securities at a level higher than that which might otherwise prevail (in each case outside Australia and not on any market in Australia), but in doing so such Dealer must act as principal and not as agent of the Issuer or Covered Bond Guarantor.  However, there is no assurance that the stabilising manager(s) (or persons acting on behalf of a stabilising manager) will undertake stabilisation action.  Any stabilisation action may begin at any time after the date on which adequate public disclosure of the final terms of the offer of the relevant Series or Tranche of Covered Bonds is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Series or Tranche of Covered Bonds and 60 days after the date of the allotment of the relevant Series or Tranche of Covered Bonds.  Any stabilisation must be conducted by the relevant stabilising manager(s) (or persons acting on behalf of any stabilising manager(s)) in accordance with all applicable regulations.

In making an investment decision, investors must rely on their own examination of the Issuer and the Covered Bond Guarantor and the terms of the Covered Bonds being offered, including the merits and risks involved. 

None of the parties to the Programme Documents make any representation to any investor in the Covered Bonds regarding the legality of its investment under any applicable laws.  Any investor in the Covered Bonds should be able to bear the economic risk of an investment in the Covered Bonds for an indefinite period of time.

Each of the Arranger and the Dealers discloses that, in addition to the arrangements and interests it will or may have with respect to the Covered Bond Guarantor and the Issuer as described in this Prospectus (the Programme Document Interests), it, its Related Entities and employees (each a Relevant Entity):

(a)       may from time to time be a Covered Bondholder or have other interests with respect to the Covered Bonds and it may also have interests relating to other arrangements with respect to a Covered Bondholder or a Covered Bond; and

(b)       may receive fees, brokerage and commissions or other benefits, and act as principal with respect to any dealing with respect to any Covered Bonds, (the Bond Interests).

Each purchaser of Covered Bonds acknowledges these disclosures and agrees that:

(i)        each Relevant Entity will or may have the Programme Document Interests and may from time to time have the Bond Interests and is, and from time to time may be, involved in a broad range of transactions including, without limitation, banking, dealing in financial products, credit, derivative and liquidity transactions, investment management, corporate and investment banking and research in various capacities in respect of the Issuer or the Covered Bond Guarantor or any other person, both on the Relevant Entity's own account and for the account of other persons (the Other Transaction Interests);

(ii)       each Relevant Entity in the course of its business (whether with respect to the Programme Document Interests, the Bond Interests, the Other Transaction Interests or otherwise) may act independently of any other Relevant Entity;

(iii)      to the maximum extent permitted by applicable law, the duties of each Relevant Entity in respect of any member of the Issuer and the Covered Bond Guarantor and the Covered Bonds are limited to the contractual obligations of the parties as set out in the Programme Documents and, in particular, no advisory or fiduciary duty is owed to any person;

(iv)      a Relevant Entity may have or come into possession of information not contained in this Prospectus that may be relevant to any decision by a potential investor to acquire the Covered Bonds and which may or may not be publicly available to potential investors (Relevant Information);

(v)       to the maximum extent permitted by applicable law, no Relevant Entity is under any obligation to disclose any Relevant Information to the Issuer, the Covered Bond Guarantor or to any potential investor and this Prospectus and any subsequent conduct by a Relevant Entity should not be construed as implying that the Relevant Entity is not in possession of such Relevant Information; and

(vi)      each Relevant Entity may have various potential and actual conflicts of interest arising in the course of its business, including in respect of the Programme Document Interests, the Covered Bond Interests or the Other Transaction Interests. The existence of a Programme Document Interest or Other Transaction Interest may affect how a Relevant Entity in another capacity (e.g. as a Covered Bondholder) may seek to exercise any rights it may have in that capacity. These interests may conflict with the interests of the Issuer or the Covered Bond Guarantor or a Covered Bondholder and such entity may suffer loss as a result. To the maximum extent permitted by applicable law, a Relevant Entity is not restricted from entering into, performing or enforcing its rights in respect of the Programme Document Interests, the Bond Interests or the Other Transaction Interests and may otherwise continue or take steps to further or protect any of those interests and its business even where to do so may be in conflict with the interests of Covered Bondholders, the Issuer or the Covered Bond Guarantor, and the Relevant Entities may in so doing act without notice to, and without regard to, the interests of any such person.

FORWARD-LOOKING STATEMENTS

This Prospectus contains various forward-looking statements regarding events and trends that are subject to risks and uncertainties that could cause the actual results and financial position of BOQ and its consolidated subsidiary undertakings (collectively, the BOQ Group) to differ materially from the information presented herein.  When used in this Prospectus, the words "estimate", "project", "intend", "anticipate", "believe", "expect", "should", "likely", "could", "may", "target", "plan" and similar expressions, as they relate to the BOQ Group and its management, are intended to identify such forward-looking statements.

Projections are necessarily speculative in nature, and some or all of the assumptions underlying the projections and other forward-looking statements may not materialise or may vary significantly from actual results. Consequently, future results may differ from the Issuer's expectations due to a variety of factors, including (but not limited to) the economic environment in Australia.  Moreover, past financial performance should not be considered a reliable indicator of future performance and prospective purchasers of the Covered Bonds are cautioned that any such statements are not guarantees of performance and involve risks and uncertainties, many of which are beyond the control of the Issuer and/or the Covered Bond Guarantor.  Neither the Arranger nor the Dealers have attempted to verify any such statements, nor do they make any representations, express or implied, with respect to such statements.

None of the Arranger, the Dealers, the Issuer, the Covered Bond Guarantor, the Security Trustee, the Trust Manager, the Bond Trustee, the Swap Providers nor any other party to a Programme Document has any obligation to update or otherwise revise any projections, including any revisions to reflect changes in economic conditions or other circumstances arising after the date of this Prospectus or to reflect the occurrence of unanticipated events, even if the underlying assumptions do not come to fruition.

PRESENTATION OF FINANCIAL AND OPERATING INFORMATION

Unless otherwise indicated, the financial information incorporated by reference into this Prospectus has been prepared in accordance with International Financial Reporting Standards (IFRS).

Capitalised Terms

Capitalised terms used in this Prospectus, unless otherwise indicated, have the meaning set out in this Prospectus. A glossary of defined terms appears at the back of this Prospectus (see "Glossary").

In this Prospectus, unless the contrary intention appears, a reference to a law or a provision of a law is a reference to that law or provision as extended, amended or re-enacted.

COVERED BONDS MAY NOT BE A SUITABLE INVESTMENT FOR ALL INVESTORS

Each potential investor in the Covered Bonds must determine the suitability of its investment in light of its own circumstances.  In particular, each potential investor should:

·          have sufficient knowledge and experience to make a meaningful evaluation of the Covered Bonds, the merits and risks of investing in the Covered Bonds and the information contained or incorporated by reference in this Prospectus or any applicable supplement;

·          have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Covered Bonds and the impact the Covered Bonds will have on its overall investment portfolio;

·          have sufficient financial resources and liquidity to bear all of the risks of an investment in the Covered Bonds, including Covered Bonds with principal or interest payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor's currency;

·          understand thoroughly the terms of the Covered Bonds and be familiar with the behaviour of any relevant indices and financial markets;

·          be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks; and

·          understand the accounting, legal, regulatory and tax implications of a purchase, holding and disposal of an interest in the relevant Covered Bonds.

Covered Bonds are complex financial instruments.  Sophisticated institutional investors generally do not purchase complex financial instruments as stand-alone investments.  They may purchase complex financial instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios.  A potential investor should not invest in Covered Bonds which are complex financial instruments unless it has the expertise (either alone or with a financial adviser) to evaluate how the Covered Bonds will perform under changing conditions, the resulting effects on the value of the Covered Bonds and the impact this investment will have on the potential investor's overall investment portfolio.

The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities.  Each potential investor should consult its legal advisers to determine whether and to what extent (1) Covered Bonds are legal investments for it, (2) Covered Bonds can be used as collateral for various types of borrowing, (3) Covered Bonds can be used as repo-eligible securities and (4) other restrictions apply to its purchase or pledge of any Covered Bonds.  Financial institutions should consult their legal advisors or the appropriate regulators to determine the appropriate treatment of Covered Bonds under any applicable risk-based capital or similar rules. No predictions can be made as to the precise effects of such matters on any investor and none of the Issuer, the Covered Bond Guarantor, the Security Trustee, the Bond Trustee, the Arranger or the Dealers makes any representation to any prospective investor or purchaser of the Covered Bonds regarding the treatment of their investment as at the date of this Prospectus or at any time in the future.

The Covered Bonds will not represent an obligation or be the responsibility of any of the Arranger, the Dealers, the Bond Trustee, the Security Trustee, any member of the BOQ Group (other than the Issuer in its capacity as Issuer under the Programme Documents) or any other party to the Programme, their officers, members, directors, employees, security holders or incorporators, other than the Issuer and the Covered Bond Guarantor.  The Issuer will be liable solely in its corporate capacity for its obligations in respect of the Covered Bonds.  The Covered Bond Guarantor will be liable solely in its capacity as trustee of the Trust for its obligations in respect of the Covered Bond Guarantee.  In both cases, such obligations will not be the obligations of their respective officers, members, directors, employees, security holders or incorporators.

TABLE OF CONTENTS

 

Risk Factors......................................................................................................................................... 13

Principal Characteristics of the Programme......................................................................................... 73

Structure Overview.............................................................................................................................. 77

General Description of the Programme................................................................................................ 84

Documents Incorporated by Reference............................................................................................... 97

Form of the Covered Bonds................................................................................................................ 99

Form of Final Terms in respect of Covered Bonds to be issued under the Programme...................... 103

Form of Pricing Supplement in respect of Exempt Covered Bonds to be issued under the Programme 118

Terms and Conditions of the Covered Bonds.................................................................................... 135

Use of Proceeds................................................................................................................................ 199

Bank of Queensland Limited............................................................................................................. 200

The BOQ Covered Bond Trust.......................................................................................................... 206

Bank of Queensland Limited Residential Mortgage Loan Origination, Mortgage Loan Features, Servicing and Enforcement...................................................................................................................................... 209

Overview of the Principal Documents............................................................................................... 217

Credit Structure................................................................................................................................. 266

Cashflows......................................................................................................................................... 270

The Mortgage Loan Rights................................................................................................................. 285

Description of the Covered Bond Provisions of the Australian Banking Act..................................... 286

Book-Entry Clearance Systems......................................................................................................... 289

Taxation............................................................................................................................................ 291

Exchange Controls and Limitations................................................................................................... 300

Subscription and Sale and Transfer and Selling Restrictions.............................................................. 301

General Information.......................................................................................................................... 309

Glossary............................................................................................................................................ 314

 

 

Risk Factors

The Issuer's activities are subject to risks that can adversely impact its business, operations, financial condition and future performance. 

This section describes the principal or material risk factors associated with an investment in the Covered Bonds that have been identified by the Issuer. 

In each category of factors set out below, the Issuer believes that each factor included in each category of factors is material, with the most material in each category (based on the Issuer's assessment of the probability of its occurrence and the expected magnitude of its negative impact) being described first in each category.

Noting the points set out above by the Issuer with respect to its assessment of the level, order of materiality and potential of occurrence of the risks set out below, prospective purchasers of Covered Bonds should consider carefully all the information contained in this Prospectus, including the considerations set out below, before making any investment decision.  Any of the risks described below, or additional risks not currently known to the Issuer or that the Issuer currently deems immaterial, could have a significant or material adverse effect on the business, financial condition, operations or prospects of the Issuer and could result in a corresponding decline in the value of the Covered Bonds.  As a result, investors could lose all or a substantial part of their investment. 

In addition, factors which are material for the purpose of assessing the market risks associated with Covered Bonds issued under the Programme are also described below.

RISK FACTORS RELATED TO THE ISSUER, INCLUDING THE ABILITY OF THE ISSUER TO FULFIL ITS OBLIGATIONS UNDER THE COVERED BONDS

Risks relating to the BOQ Group

The Covered Bonds will constitute direct, unsecured and unconditional obligations of the Issuer. A purchaser of Covered Bonds relies on the creditworthiness of the Issuer and no other person (other than the Covered Bond Guarantor in respect of payments under the Covered Bond Guarantee).  Investment in the Covered Bonds involves the risk that subsequent changes in actual or perceived creditworthiness of the Issuer may adversely affect the market value of the Covered Bonds.

Set out below are the principal risks and uncertainties associated with the Issuer. However, the risk in each sub-category that the Issuer considers most material is listed first, based on the information available at the date of this Prospectus and the Issuer's best assessment of the likelihood of each risk occurring and potential magnitude of its negative impact to the BOQ Group should such risk materialise. In the event that one or more of these risks materialise, the Issuer's business, operations, financial condition and future performance may be adversely impacted.

There may be other risks faced by the Issuer and its controlled entities that are currently unknown or are deemed immaterial, but which may subsequently become known or material.  These may individually or in aggregate adversely impact the Issuer's future financial performance and position.  Accordingly, no assurances or guarantees of future performance, profitability, distributions or returns of capital are given by the Issuer.

Credit risk

As a financial institution, the Issuer is exposed to the risks associated with extending credit to other parties. Credit risk is the risk of financial loss arising from a debtor or counterparty failing to meet their contractual debts and obligations or the failure to recover the recorded value of secured assets. Credit risk arises from both the Issuer's lending activities as well as markets and trading activities.

The Issuer's lending activities cover a broad range of sectors, customers and products, including residential mortgages, consumer loans, commercial loans (including commercial property), equipment finance, vendor finance, derivatives and other finance products.

Less favourable economic or business conditions or a deterioration in commercial and residential property markets, whether generally (such as recent increases in inflation and interest rates by central banks) or in a specific industry sector or geographic region, or external events such as natural disasters and natural hazards (including climatic, biological (such as the COVID-19 pandemic (as defined below)), meteorological or geological), could cause customers to experience an adverse financial situation, thereby exposing the Issuer to the increased risk that those customers will fail to meet their obligations in accordance with agreed terms. 

An increase in the failure of customers to meet their obligations or the decline in the value of security held by the Issuer (including a decline in house prices), could adversely impact the Issuer's financial performance, financial position, capital resources and prospects. The large proportion of customers rolling from fixed rate to variable rate in the next 12 months may also affect customer's ability to meet their obligations and may require the Issuer to offer additional support.

The Issuer's markets and trading activities exposes the Issuer to counterparty risk on other market counterparties that the Issuer may face when entering into transactions such as interest rate swaps or cross currency swaps, should those counterparties be unable to honour their contractual obligations due to bankruptcy, lack of liquidity, operational failure or other reasons.

Such counterparty risk is more acute in difficult or volatile market conditions (for example, in a high inflation environment with rising interest rates) where the risk of failure of counterparties is higher, which could adversely impact the Issuer's financial performance, financial position, capital resources and prospects. There is also the risk that any provisioning by the Issuer will be inadequate and any losses suffered will exceed the Issuer's expectations.

Dependence on the Australian economy

The Issuer's business activities are primarily located in Australia and therefore the Issuer's revenues and earnings are largely dependent on customer and investor confidence, the state of the economy, the residential lending market and prevailing market conditions in Australia. These factors are, in turn, impacted by both domestic and international economic and political events, natural disasters and the general state of the global and Australian economy.

A downturn in the Australian economy (including as a result of high inflation or rising interest rates which can lead to increased cost of living pressures) may give rise to an increase in customer defaults, ultimately affecting the Issuer's financial performance, profitability and return to investors.

Dependence on real estate markets

Residential and commercial property lending, together with property finance, including real estate development and investment property finance, constitute important businesses to the Issuer.

A significant decrease in residential or commercial property valuations or a significant slowdown in Australian residential or commercial real estate markets (including as a result of recent interest rate rises in Australia) could result in a decrease in the amount of new lending the Issuer is able to write and/or increase the losses that the Issuer may experience from existing loans, which, in either case, could adversely impact the Issuer's financial performance, financial position, capital resources and prospects.

Further, should the Issuer's regulators impose new supervisory measures impacting the Issuer's residential or commercial lending or if Australian housing price growth subsides or commercial property valuations decline, the demand for the Issuer's home lending or commercial lending products may decrease, which may adversely affect the Issuer's financial performance, financial position, capital resources and prospects.

Disruption to financial markets

In recent years, global credit and equity markets have experienced periods of uncertainty, followed by periods of stability and low volatility. More recently, financial markets globally have been impacted by central bank monetary policy (including raising interest rates), inflationary pressures, expected slowing of global economic growth and the COVID-19 pandemic (see also "Risk Factors - Credit Risk -  The Coronavirus (COVID-19) pandemic and similar events" for further details), which has seen governments and central banks around the world implement both monetary and fiscal policy to reduce volatility, manage inflation and maintain liquidity in financial markets, whilst also promoting sustainable growth to severely impacted economies.

More recently the failure of a number of United States regional banks, as well as the government bailout of Credit Suisse and subsequent merger with UBS in March 2023, has caused disruption to wholesale funding markets and raised concerns regarding the financial strength of some financial institutions. Financial market stability relies on the flow of credit and investor confidence, and as such any event, such as the failure of a bank, that disrupts the flow of credit and reduces investor confidence can have adverse impacts on financial markets in general (see also "Risk Factors - Funding and Liquidity Risk"). Whilst the Issuer  is under a different regulatory environment and has different risk management practices than some of the United States regional banks, the Issuer's performance can be influenced by financial market instability and access to wholesale markets. In addition, the Issuer sources deposits from a range of customers as part of the BOQ Group's diversified funding base. As such, any disruption in financial markets that either prevents the Issuer from accessing credit markets or reduces investor and depositor confidence in the BOQ Group could impact either the BOQ Group's financial performance, financial position, capital and liquidity resources and prospects.

 

The uneven pace of global economic growth, environmental and social issues (including emerging issues such as payroll compliance and modern slavery risk), costs and availability of capital, central bank intervention, inflationary pressures, increasing interest rates, shifts in global commodity prices, consumer and business confidence, outlook and investment, risings costs of living, the tightening labour markets, and the risk of asset bubbles as a result of changing monetary and fiscal policy, all pose risks to global financial markets.

There are also significant and ongoing global political and geopolitical developments, or the consequences of such developments, that have the potential to cause, or are causing, conflict and/or impact major global economies, including the conflict between Russia and Ukraine (including the sanctions against Russia which are also impacting the global economy, with higher energy and commodity prices), diplomatic tensions between the Chinese and Australian governments, geopolitical tensions in the Asia-Pacific region and the introduction of tariffs and other protectionist measures by various countries such as the United States and China (including as a result of tensions between the United States and China). A shock to one of the major global economies could result in currency and interest rate fluctuations, operational disruptions and dislocation in financial markets that negatively impact the BOQ Group. 

Financial markets globally may also be disrupted by future biological hazards, pandemics and contagious diseases.

Any such market and economic disruptions or a general weakening in the global economy, could have an adverse effect on financial institutions such as the BOQ Group because consumer and business confidence may decrease, unemployment may rise and demand for the products and services the BOQ Group provides may decline, thereby reducing the BOQ Group's earnings. These conditions, as well as the increase in interest rates, may also affect the ability of its borrowers to repay their loans, or the BOQ Group's counterparties to meet their obligations, causing it to incur higher credit losses. These events could also result in the undermining of confidence in the financial system, reducing liquidity and impairing the BOQ Group's access to funding and impairing its customers and counterparties and their businesses.

The nature and consequences of any such event, or combination of events, as described above are difficult to predict and there can be no guarantee that the BOQ Group could respond effectively to any such event. Any such event and/or the effectiveness of the BOQ Group's response could adversely affect the BOQ Group's financial performance, financial position, capital resources and prospects.

 

Regulatory, legal and compliance risk

Regulation in Australia

As a financial services provider, the Issuer is subject to substantial regulatory and legal oversight in Australia. The key regulatory bodies that oversee the Issuer and its subsidiaries include APRA, the Australian Securities and Investments Commission (ASIC), the Office of the Australian Information Commissioner (OAIC), the Australian Transaction Reports and Analysis Centre (AUSTRAC), the Australian Competition and Consumer Commission (ACCC), the RBA, the Australian Securities Exchange (ASX) and the Australian Taxation Office (ATO).

Increased public, political and regulatory scrutiny of the financial services industry has resulted in an increase in changes to the laws and regulations that the BOQ Group must comply with. In addition, regulation is becoming increasingly extensive and complex and some areas of regulatory change involve multiple jurisdictions seeking to adopt a coordinated approach or certain jurisdictions seeking to expand the territorial reach of their regulation. For example, the current political and regulatory environment that the BOQ Group is operating in has also seen (and may in the future see) the Issuer's regulators receive new powers. The nature and extent of these future changes and impacts cannot be predicted with any certainty but the impact for the Issuer is not likely to be greater than it is for any other financial institution.

Laws and regulations have been passed that broaden the range of misconduct that can attract a civil penalty. Regulators have also been increasing their use of enforcement powers in relation to compliance with laws and regulations, both new and existing. For example, ASIC can commence civil penalty proceedings and seek significant civil penalties against an Australian Financial Services licensee (such as the Issuer) for failing to do all things necessary to ensure that financial services provided under the licence are provided efficiently, honestly and fairly. This trend towards increasing enforcement actions taken for failing to meet compliance obligations could continue in the future and be expanded into other areas of regulation that the BOQ Group is subject to.

Changes may also occur in the oversight approach of regulators, which could result in a regulator preferring its enforcement powers over a more consultative approach. In recent years, there have been significant increases in the nature and scale of regulatory investigations, enforcement actions and the quantum of fines issued by global regulators. Increased oversight from regulators could result in increased costs to BOQ in meeting the requirements or expectations of regulators, as well as increased risk of fines, penalties or other sanctions being imposed on the Issuer.

APRA has stated that it will use enforcement where appropriate to prevent and address serious prudential risks and hold entities and individuals to account.  The current environment may see a shift in the nature of enforcement proceedings commenced by regulators. As well as conducting more civil penalty proceedings, The Issuer's regulators may be more likely to bring criminal proceedings against institutions and/or their representatives in the future. Alternatively, regulators may elect to make criminal referrals to the Commonwealth Department of Public Prosecutions or other prosecutorial bodies.

Regulatory powers to take enforcement action, coupled with the increasingly active supervisory and enforcement approaches adopted by them, increases the risk of adverse regulatory action being brought against the BOQ Group should the Issuer fail to comply with any legal or regulatory obligations or respond appropriately to regulatory change. Regulatory action brought against the BOQ Group may expose the BOQ Group to an increased risk of litigation brought by third parties such as the BOQ Group's customers and/or its shareholders (including through class action proceedings), which may require the BOQ Group to pay compensation to those third parties and/or undertake further remediation activities. A negative outcome to regulatory investigations or litigation involving the Issuer may impact the Issuer's reputation, divert management time from operations and affect the BOQ Group's financial performance and position, profitability and returns to investors.

The nature and impact of future changes are not predictable and are beyond the Issuer's control. There is also a risk that regulators or the courts change their interpretation of an existing law or regulation. There is operational and compliance risk and cost associated with the implementation of any new or changed laws and regulations, or changes to the interpretation of an existing law or regulation, that apply to the Issuer as a financial institution. In particular, changes to laws, regulations, industry codes, government policies or accounting standards, including changes in interpretation or implementation of laws, regulations, government policies or accounting standards could adversely affect one or more of the BOQ Group's businesses and could require the Issuer and/or the BOQ Group to incur substantial costs. Further impacts include required levels, or the measurement, of bank liquidity and capital adequacy (potentially requiring the Issuer to increase the levels and types of capital held by the Issuer), limiting the types of financial services and products that can be offered, and/or reducing the fees which banks can charge on their financial services. APRA may introduce new prudential regulations or modify existing regulations, including those that apply to the Issuer as an authorised deposit-taking institution (ADI). Any such event could adversely affect the business or financial performance of the BOQ Group. Any new or amended rules may result in changes to the Issuer's capital adequacy ratio.

The Issuer is responsible for ensuring that it complies with all applicable legal and regulatory requirements (including accounting standards, where applicable, as well as rules and regulations relating to corrupt and illegal payments and money laundering) and industry codes of practice (such as the Banking Code of Practice), as well as meeting its ethical standards. The failure to comply with applicable regulations could result in suspensions, restrictions of operating licences, fines and penalties or limitations on its ability to do business or requirement to undertake remediation programmes. They could also have adverse reputational consequences. These costs, expenses and limitations could have an adverse effect on the Issuer's and the BOQ Group's financial performance, financial position, capital resources and prospects. The legal and regulatory requirements described above could also adversely affect the profitability and prospects of the Issuer and the BOQ Group or their businesses to the extent that they limit the Issuer's and BOQ Group's operations and flexibility of the Issuer's and BOQ Group's businesses. The nature and impact of future changes in such requirements are not predictable and are beyond the Issuer's and the BOQ Group's control.

Significant domestic and global legislative and regulatory developments and industry reforms which will, or may, impact on the BOQ Group's operations in Australia are further set out below. Depending on the nature, implementation or enforcement of any regulatory requirements, they may have an adverse impact on the Issuer's financial performance, financial position, capital resources and prospects.

The nature, timing and impact of future regulatory reforms or changes are not predictable, can be substantial and are beyond the BOQ Group's control. Such changes can require the BOQ Group to significantly increase investments in staff, systems and procedures to comply with the regulatory requirements. Regulatory compliance and the management of regulatory change is an increasingly important part of the BOQ Group's strategic planning. Regulatory change may also impact the BOQ Group's operations by requiring it to have higher levels, and better quality of capital as well as place restrictions on the businesses the BOQ Group operates or require the BOQ Group to alter its product or service offerings. If regulatory change has any such effect, it could adversely affect one or more of the BOQ Group's businesses, restrict its flexibility, require it to incur substantial costs and impact the profitability of one or more of the BOQ Group's businesses.

 

The BOQ Group's regulators, including but not limited to ASIC, APRA, AUSTRAC and the ACCC, also engage with the BOQ Group and may request certain information from the BOQ Group or perform reviews of the BOQ Group's operational risk, compliance arrangements or risk culture. During the financial year ended 2022, the BOQ Group had numerous engagements with its regulators and been subject to reviews, including by AUSTRAC.

 

In the financial year ending 2023 (FY23), the Issuer has regularly engaged with its principal regulators, APRA, AUSTRAC and ASIC. Internal and external reviews identified that a material uplift is required in respect of BOQ's operational resilience, risk culture and AML/CTF Program (as defined below) and compliance. In order to address the matters identified in these reviews, the Issuer intends to undertake a multi-year Integrated Risk Program to strengthen its non-financial resilience.

 

There is a risk that the Integrated Risk Program will not adequately achieve the Issuer's objective. Further, there is a risk that the outcome of this ongoing engagement with regulators will involve regulators imposing fines, sanctions or taking other enforcement actions (including increased supervision) in relation to the BOQ Group's compliance with relevant laws and regulations.

Banking Executive Accountability Regime

The Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Act 2018 (Cth) (BEAR or BEAR Legislation) established accountability obligations for ADIs and their senior executives and directors. The BEAR Legislation applied to the Issuer from 1 July 2019.

Penalties may apply for breach of this legislation and the legislation may impact the Issuer's ability to attract and retain high quality executives.

Financial Crime Obligations

 

The BOQ Group is subject to anti-money laundering and counter-terrorism financing (AML/CTF) laws, anti-bribery and corruption laws, economic and trade sanctions laws and tax transparency laws in the jurisdictions in which it operates. These laws can be complex and, in some circumstances, impose a diverse range of obligations. Specifically, under the Anti-Money Laundering and Counter‑Terrorism Financing Act 2006 of Australia (AML/CTF Act) and the Anti-Money Laundering and Counter Terrorism Financing Rules Instrument 2007 (No.1) of Australia (together, the Australian AML/CTF Laws) the BOQ Group must have in place an AML/CTF program (the AML/CTF Program) specifying how the BOQ Group complies with the Australian AML/CTF Laws. The primary purpose of the AML/CTF Program is to identify, mitigate and manage the money laundering and terrorism financing (ML/TF) risk the BOQ Group may reasonably face through the provision of any designated service offered by any member of the BOQ Group. The AML/CTF Program must consist of two parts, 'Part A' which defines how the processes and procedures help identify, mitigate and manage ML/TF risks and 'Part B' which focuses on the procedures to identify customers and verify a customer's identify before the Issuer can offer any designated services. The BOQ Group, under its AML/CTF Program, is also required to conduct ongoing due diligence on relevant customers and undertake periodic risk assessments. The Australian AML/CTF Laws also require the Issuer to report certain matters and transactions to AUSTRAC (including in relation to International Funds Transfer Instructions, Threshold Transaction Reports and Suspicious Matter Reports) and ensure that certain information is not disclosed to third parties in a way that would contravene the 'tipping off' provisions in the Australian AML/CTF Laws. The AML/CTF Program is to be reviewed regularly and must be regularly independently reviewed.

 

Due to the volume of transactions that the BOQ Group processes, the undetected failure or the ineffective implementation, monitoring or remediation of a system, policy, process or control (including in relation to a regulatory reporting obligation) could result in breaches of AML/CTF obligations. This in turn could lead to significant monetary penalties. If the Issuer fails, or where the Issuer has failed, to comply with these obligations, it could face regulatory enforcement action such as litigation, significant fines, penalties and the revocation, suspension or variation of licence conditions.

 

Non-compliance with financial crime obligations could also lead to litigation commenced by third parties (including class action proceedings) and cause reputational damage. These actions could, either individually or in aggregate, adversely affect the Issuer's business, prospects, reputation, financial performance or financial condition.

As previously noted in "Risk Factors - Regulatory, legal and compliance risk - Regulation in Australia", AUSTRAC has raised concerns with the Issuer in respect of its AML/CTF Program in FY23. The Issuer continues to engage with AUSTRAC in relation to these concerns.

Consumer Data Right / Open Banking

The Australian Government passed legislation in August 2019 to establish a "Consumer Data Right" (CDR) rules regime which seeks to improve consumers' ability to compare and switch between products and services. The CDR regime is being introduced in the banking sector in phases. These reforms (referred to as Open Banking) are expected to reduce the barriers to new entrants into, and increase competition in, the banking industry in Australia. 

Ongoing competition for customers can lead to compression in profit margins and loss of market share, which may ultimately impact the Issuer's financial performance and position. Open Banking's regulatory timelines require changes to the Issuer's operations and technology.  There is a risk that the Issuer does not achieve compliance with the set milestones for the complete implementation of Open Banking or that the Issuer does not implement open banking requirements in a compliant way. For example, the Issuer did not meet the initial Phase 1, 2 or 3 compliance dates and received an infringement notice from the ACCC in relation to non-compliance with the CDR Rules. ME also sought a compliance exemption from the ACCC for a later compliance date for initial Phases.  Open Banking may also lead to cyber and fraud risks in the CDR ecosystem. Governance mechanisms including accountabilities, controls and frameworks are still evolving and, under the Open Banking regime, customer data will be shared with a broader range of stakeholders. The significant resources and management time required to implement Open Banking may also have a flow-on effect, impacting the Issuer's timely implementation of other regulatory reforms and its transformation agenda.

International regulation

There continues to be proposals and changes by global regulatory advisory and standard-setting bodies, such as the International Association of Insurance Supervisors, the Basel Committee on Banking Supervision (Basel Committee) and the Financial Stability Board, which, if adopted or followed by domestic regulators, may increase operational and capital costs or requirements (see "Basel III" below for further information).

The BOQ Group's businesses may also be affected by changes to the regulatory framework in other jurisdictions, including the cost of complying with regulation that has extra-territorial application to the extent it is relevant to the BOQ Group. These could include the Bribery Act 2010 (UK), FATCA (as defined in "Taxation - Foreign Account Tax Compliance Act"), General Data Protection Regulation (EU), Dodd-Frank Wall Street Reform (US) and Consumer Protection Act 2010 (US) and other reforms.

There has also been increased regulator expectation and focus in relation to a number of other areas such as privacy and security of data, data quality and controls, governance and culture and conduct.  Changes in international regulation could increase costs and/or restrict the Issuer from operating in certain businesses, which could adversely impact the Issuer's financial performance, financial position, capital resources and prospects.

Regulatory review and investigations

From time to time, the Issuer may be exposed to regulatory reviews or investigations (including those identified in "Risk Factors - Regulatory, legal and compliance risk - Regulation in Australia"). The nature of those reviews and investigations are wide ranging and, for example, include a range of matters including responsible lending practices, risk governance, operational risk, compliance and risk culture, product suitability, and conduct in financial markets and capital markets transactions.

Although the Issuer intends to comply with all regulatory reviews and investigations, the outcomes of these reviews and investigations are uncertain. If any of these reviews lead to legislative or other regulatory change, this could have an impact on the Issuer's business. In addition, enforcement action may result in fines, remediation or other regulatory action or reputation impacts, which could have an adverse impact on the overall financial position and performance of the Issuer.

Basel III

Basel III is a comprehensive set of reform measures, developed by the Basel Committee, to strengthen the regulation, supervision and risk management of the banking sector globally.

 

The International Standards for Basel III have now been finalised and following this, APRA released its final requirements in relation to capital adequacy and credit risk capital requirements for ADIs in November 2021 for implementation from 1 January 2023 (the APRA capital reforms).

 

The APRA capital reforms follow the consultation process that began in February 2018 when APRA released a consultation paper regarding proposed changes to the capital framework for ADIs, and was finalised in December 2021 with the release of new standards for adoption from 1 January 2023.

 

Significant aspects of APRA's final requirements include but are not limited to greater alignment with internationally agreed Basel standards relating to non-residential mortgages exposures, introduction of the Basel II capital floor, the implementation of more risk-sensitive risk weights for residential mortgage lending, improving the flexibility of the capital framework through the introduction of a default level of the countercyclical capital buffer and increasing the capital conservation buffer for Internal Ratings Based (IRB) ADIs, improving the transparency and comparability of ADIs' capital ratios and implementing a minimum leverage ratio for IRB ADIs at 3.5 per cent.

 

The Basel Committee continue to meet regularly to assess risks and vulnerabilities to the global banking system which includes evaluating the effectiveness of Basel III reforms. During the fourth quarter of 2022, the Basel Committee published reports on the Basel III reforms and buffer useability considering the COVID-19 pandemic experience. These reports may give rise to further international policy developments, with APRA retaining full discretion whether to implement and on what time frame to implement any international policy developments to its prudential framework.

 

The capital frameworks that the BOQ Group operates under have been recently reviewed in light of the Basel III APRA capital reforms, which came into effect on 1 January 2023. Changes to regulatory frameworks and the requirement of the Issuer to hold more capital can have an adverse impact on the BOQ Group.

Regulatory fines and sanctions

The increased regulatory focus on compliance and conduct risk and the upward trend in fines and enforcement actions imposed by, and settlement sums agreed with, regulators, means that these risks continue to be an area of focus for the Issuer. The Issuer is overseen by a number of regulators, including APRA, ASIC, AUSTRAC, ACCC, the Office of the Australian Information Commissioner (OAIC), the Banking Code Compliance Committee (BCCC), the RBA and the ASX. These regulators could take enforcement action against the Issuer for compliance breaches, including by imposing fines, penalties and sanctions.

In particular, the risk of non-compliance with anti-money laundering and counter-terrorist financing, bribery and sanction laws remains high given the current environment in which the Issuer operates and the increased focus by regulators and law enforcement agencies on how banks comply with these laws. A failure to develop and implement a robust program to combat money laundering, bribery and terrorist financing or to ensure compliance with economic sanctions could have serious legal and reputational consequences for the Issuer and its employees. Consequences can include fines, criminal and civil penalties (including custodial sentences), civil claims, reputational harm and possible limitations or amendments to banking licences and limitations on doing business in certain jurisdictions, as well as costs to remediate and uplift compliance processes and controls as well as increased aggregate costs of remediation.

Customer remediation risk

Operational risk, technology risk, conduct risk or compliance risk events have required, and could in the future require, the Issuer to undertake customer remediation activity.  The Issuer relies on a large number of policies, processes, procedures, systems and people to conduct its business. Breakdowns or deficiencies in one of these areas (arising from one or more operational risk, technology risk, conduct risk or compliance risk events) have resulted, and could in the future result in, adverse outcomes for customers which the Issuer is required to remediate.

These events could require the Issuer to incur significant remediation costs (which may include compensation payments to customers, costs associated with correcting the underlying issue and costs associated with obtaining assurance that the remediation has been conducted appropriately) and result in reputational damage.

There are significant challenges and risks involved in customer remediation activities. The Issuer's ability to quickly and accurately investigate an adverse customer outcome that may require remediation could be impeded if the issue is a legacy matter spanning beyond the Issuer's record retention period, if the Issuer's record keeping and data is otherwise inadequate or if there are multiple matters to be investigated and remediated at the same time. Depending on the nature of the issue, it may be difficult to quantify and scope the remediation activity.

Determining how to quickly, properly and fairly compensate customers can also be a complicated exercise involving numerous stakeholders, such as the affected customers, regulators and industry bodies. The Issuer's proposed approach to a remediation may be affected by a number of events, such as a group of affected customers commencing class action proceedings on behalf of the broader population of affected customers, or a regulator exercising their powers to require that a particular approach to remediation be taken. The Issuer's ability to quickly remediate customers could also be impeded by having multiple matters to remediate at the same time and/or having insufficient resources to perform remediation. These factors could impact the cost of, and timeframe for, completing the remediation activity, potentially resulting in the Issuer failing to execute the remediation in a timely manner. A failure of this type could lead to a regulator commencing enforcement action against the Issuer or result in customer or class action litigation against the Issuer. The ineffective or slow completion of a remediation also exposes the Issuer to reputational damage, with the Issuer potentially being criticised by regulators, affected customers, the media and other stakeholders.

The significant challenges and risks involved in scoping and executing remediations in a timely way also create the potential for remediation costs actually incurred to be higher than those initially estimated by the Issuer.

If the Issuer cannot effectively scope, quantify or implement a remediation activity in a timely way, there could be an adverse impact on the Issuer's financial performance, financial position, capital resources and prospects.

Failure of risk management strategies

There is a risk that the Issuer implements risk management strategies and internal controls that do not identify, assess, measure, monitor, report and mitigate current risks or those that develop in the future, or controls do not operate effectively. The complexity of legacy systems and manual nature of some of the BOQ Group's processes presents additional complexity for the BOQ Group to improve its risk management framework and practices and strengthen its risk culture.

There is a risk that the Issuer fails to have or develop an organisational culture that supports a mature risk culture. This includes the risk that the Issuer does not sufficiently improve the maturity of its risk behaviours and architecture and that its framework and practices fail to achieve early identification and accountability of current and future risks.

 

Furthermore, there is a risk that the improvements to the Issuer's risk management framework and capabilities and/or the strengthening of its risk culture does not achieve the anticipated benefits or does not strengthen the Issuer's financial and operating resilience or risk culture, or that it does not meet regulator requirements or expectations.

If any of the BOQ Group's risk management processes and procedures prove ineffective or inadequate, including by failing to identify risks early, not allocating accountability in a timely manner or are otherwise not appropriately implemented, the BOQ Group could suffer unexpected losses, reputational damage and increased costs to meet regulators' expectations which could adversely impact the BOQ Group's financial performance, financial position, ability to pay future dividends or capital distributions, capital resources and prospects.

Mergers, acquisitions and divestments

The Issuer regularly considers a range of corporate opportunities, including acquisitions, divestments, joint ventures and investments and accordingly the Issuer may engage in merger, acquisition or divestment activities which facilitate the Issuer's strategic direction.

These activities may involve entering new markets, exiting products and/or offering third party manufactured products or expanding the BOQ Group's current product suite and may affect the BOQ Group's risk profile through changes to, or to the relative importance of, the geographies and/or product types to which it has exposures. Whilst the Issuer recognises that benefits may arise from merger, acquisition or divestment activities, significant risks exist in both the execution and implementation of such activities.

It is likely that the Issuer would raise additional debt or raise equity to finance any major merger or acquisition and this would cause the Issuer to face the financial risks and costs associated with additional debt or equity. Where the Issuer decides to divest a business or asset, this may involve a loss against book value, particularly of any goodwill or other intangibles and may require the Issuer to provide certain warranties and indemnities.

Changes in ownership and management may result in impairment of relationships with employees and customers of the acquired and existing businesses. Depending on the type of transaction, it could take a substantial period of time for the Issuer to realise the financial benefits of the transaction, if any.

Any acquisition or divestment may result in a material positive or negative impact on the BOQ Group's financial position, including reported profit and loss and capital ratios. There can be no assurance that any acquisition (or divestment) would have the anticipated positive results, including results relating to the total cost of integration (or separation), the time required to complete the integration (or separation), the amount of longer-term cost savings, or synergies, the overall performance of the combined (or remaining) entity, or an improved price for the Issuer's securities. The Issuer's operating performance, risk profile and capital structure may be affected by these corporate opportunities and there is a risk that the Issuer's credit ratings may be placed on credit watch or downgraded if these opportunities are pursued.

Integration (or separation) of an acquired (or divested) business can be complex and costly, sometimes including combining (or separating) relevant accounting and data processing systems, and management controls, as well as managing relevant relationships with employees, customers, regulators, counterparties, suppliers and other business partners. Integration (or separation) efforts could create inconsistencies in standards, controls, procedures and policies, as well as diverting management attention and resources. This could adversely affect the Issuer's ability to conduct its business successfully and impact the Issuer's operations, reputation, financial performance, financial position, capital resources and prospects. Additionally, there can be no assurance that employees, customers, counterparties, suppliers and other business partners of newly acquired (or retained) businesses will remain post-acquisition (or post-divestment), and the loss of employees, customers, counterparties, suppliers and other business partners could adversely affect the Issuer's operations, reputation, financial performance, financial position, capital resources and prospects.

 

ME Integration

In July 2021, the Issuer completed the acquisition of Members Equity Bank Limited (ACN 070 887 679) (ME). While significant progress has been completed to date on integration of the ME business, this is not yet complete and the Issuer  still faces the risk that integration may take longer, be more complex or cost more than expected, encounter unexpected challenges or issues particularly in integrating technology and merging operations, divert management attention, cause customer churn or cultural issues which may result in loss of key employees or that the anticipated benefits and synergies of the integration may be less than estimated or less than expected by the market. Any failure to achieve the targeted synergies of integration may impact the financial performance, operation and position of the BOQ Group and the future price of the Issuer's shares.

The Coronavirus (COVID-19) pandemic and similar events

On 11 March 2020, the World Health Organisation declared a pandemic following the emergence in China, and subsequent spread to the rest of the world, of a severe acute respiratory illness caused by a novel coronavirus (COVID-19). The COVID-19 pandemic has had an adverse impact on global, national and regional economies and caused disruption to trade and business activities within Australia and globally.

During the peak of the crisis, governments worldwide, including the Australian Government, enacted wide ranging restrictions on, suspensions of, or advice against, regional and international travel, large gatherings of people as well as prolonged closures of workplaces which had a substantial negative impact on economic and business activity. While certain restrictions have been lifted or modified, governments may in the foreseeable future reintroduce prior restrictions or implement and introduce further measures to contain the spread of the COVID-19 pandemic (including as a result of further variants or outbreaks) to limit adverse health outcomes.

Similar risks are also applicable to any future pandemic.

Governments and central banks also took increased measures to stabilise the financial markets, however if such actions prove to be unsuccessful in mitigating economic disruption and/or the COVID-19 pandemic is prolonged (including as a result of further variants or outbreaks) the negative impact on global economies could continue. Despite government measures and assistance introduced to limit the severity of the impact of COVID-19 on businesses and individuals, including those support measures provided by the Issuer to its customers, there is the continued risk that the COVID-19 pandemic (including future variants), or other outbreaks or pandemics, will cause customers to experience an adverse financial situation thereby exposing the BOQ Group to an increased risk of reduced customer demand for the Issuer's products and services and higher credit risk of customers failing to meet their obligations. The support provided by the Issuer throughout the COVID-19 pandemic has had, and may continue to have, a negative impact on the Issuer's financial performance and may see the Issuer assume greater risk than it would have normally. There is also the risk that future government or regulator intervention to support the economy may be required to be supported by banks (including the Issuer).

In response to the COVID-19 pandemic, the Issuer implemented, and may need to implement in the future, for either COVID-19 or other pandemics or similar events, new measures within a short timeframe. Such actions increase the risk of operational and compliance shortcomings, potentially leading to adverse impacts on the Issuer's financial performance, customer service or regulator and/or legal action.

In addition, the COVID-19 pandemic has disrupted numerous industries and global supply chains leading to shortages of materials and labour and/or costs increases. There is the risk that these disruptions continue to occur (including as a result of new variants) and impact the provision of services, activities and products delivered to the BOQ Group by third party vendors and in turn possibly negatively impact the timelines of strategic projects.

With respect to the potential future impacts of the COVID-19 pandemic on the Issuer's financial performance, any adjustment or provisioning made by the Issuer to reflect the impact of COVID-19 is based on circumstances that continue to evolve, making any definitive assessment difficult. There is a risk that the assessments or stress testing used by the Issuer to determine any forward-looking adjustments prove to be subsequently incorrect with the impact on the BOQ Group's financial performance or position materially different to that forecasted.  Similarly, those effects are proving to have a broader impact on the economy due to inflationary pressures.

All of the above, together with any other epidemics or pandemics that may arise in the future, have the ability to impact the BOQ Group's financial performance, financial position, capital resources and prospects.

Climate change risk

The Issuer, its customers and external suppliers, may be adversely affected by physical, transition and liability risks of climate change (including the possibility of destruction or disruption to human life, physical and natural capital and socioeconomic impacts to liveability, food systems and infrastructure assets).

Physical risks could include longer term chronic changes in climate such as droughts and increases in sea levels as well as acute changes to the frequency and magnitude of extreme weather events, such as floods, storms, heat waves and the occurrence of fires. These effects, whether acute or chronic in nature, may directly impact the Issuer and its customers through damage to assets and property, business disruption and changes to income and costs, changes to asset values and liquidity, changes to cost and availability of insurance and may have an adverse impact on financial performance (including through an increase in defaults on customers' loans).

Initiatives to mitigate or respond to adverse impacts of climate change may result in transition risks, related to changes to domestic and international policy regulatory settings, market and asset prices, economic activity, technological innovation and customer behaviour, particularly in geographic locations and industry sectors adversely affected by these changes. Liability risks could stem from the Issuer or its clients experiencing litigation, regulatory enforcement or reputational damage as a result of climate change.

Failure of the Issuer to effectively assess and respond to the risks of climate change (including transition to a low carbon footprint) or to be perceived as failing to do so, could adversely affect the Issuer's reputation which in turn could adversely affect Issuer's financial performance, financial position, capital resources and prospects. 

In addition, natural disasters as a result of climate change such as (but not restricted to) cyclones, floods and earthquakes, and the economic and financial market implications of such disasters on domestic and global market conditions could adversely impact the Issuer's financial performance, financial position, capital resources and prospects.

Environmental and social risks

The Issuer and its customers operate businesses and hold assets in a diverse range of sectors, asset types and geographical locations. The Issuer may suffer losses due to the impacts of hostile, catastrophic or unforeseen events including due to environmental and social factors.

 

Environmental events could include natural disasters such as (but not restricted to) cyclones, floods, earthquakes, extreme weather events (such as drought and floods), biodiversity loss, fire and release of toxic substances which given climate change, are growing risks to both the Issuer and the Australian and global economies.

 

Geopolitical risks including those arising from conflicts, trade tension, terrorist attacks, military conflict, sanctions and acts of civil or international hostility are also increasing. For example, the continued conflict between Russia and Ukraine which escalated in February 2022 has the potential to escalate further, including as a result of measures taken against Russia by other countries, resulting in elevated geopolitical instability, trade restrictions, disruptions to global supply chains and commodity markets, increases in energy prices and a potential adverse impact in markets and a general downturn in the global economy. Any deterioration in global markets can result in currency and interest rate fluctuations and operational disruptions that can negatively impact the BOQ Group.

 

Further, the deteriorating relations between Taiwan and China also have the potential to have a material impact on the global manufacturing supply chain, which in turn can lead to a deterioration in global economies and/or cause operational disruptions to the BOQ Group and/or its customers.

 

All of these risks have the ability to disrupt business activities, affect supply chain, impact operations or reputation, increase credit risk or exposures, affect value of assets or impact ability to recover amounts owing to the Issuer.

 

The Issuer also faces increasing public scrutiny, laws and regulations related to environmental and social factors and a failure to act responsibly in a number of areas such as diversity, corporate governance, modern slavery and/or to manage these risks and respond appropriately could adversely impact the Issuer's reputation and financial performance.

Funding and liquidity risk

Financial institutions (including the BOQ Group) are currently subject to global credit and capital market conditions, which experienced extreme volatility, disruption and decreased liquidity following the global financial crisis, the COVID-19 market disruptions and the more recent United States regional bank failures. Global credit and capital market conditions rely on the flow of credit and investor confidence. As such, any event that disrupts the flow of credit, or reduces investor confidence can have a material impact on the Issuer's funding and liquidity levels. In addition, the Issuer relies on deposits provided by natural persons, small to medium enterprises, non-financial corporates and financial corporates as a vital funding tool. Whilst the Issuer has a diversified funding base, any loss in confidence from depositors as to the financial stability of the Issuer could have a material adverse impact on both the Issuer's funding and liquidity levels.

The recent events in the United States involving the Silicon Valley Bank and Signature Bank and their placement into receivership with the Federal Deposit Insurance Corporation (FDIC) has created bank-specific and broader financial institution liquidity risk and concerns.

Although the Department of the Treasury, the Federal Reserve, and the FDIC in the United States have jointly released a statement that depositors at Silicon Valley Bank and Signature Bank would have access to their funds, even those in excess of the standard FDIC insurance limits, future adverse developments with respect to specific financial institutions or the broader financial services industry may lead to market-wide liquidity shortages. The failure of any international bank may increase the possibility of a sustained deterioration of international financial market liquidity, or illiquidity at clearing, cash management and/or custodial financial institutions.

If other international banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, this could affect the way the Issuer conducts its business and its ability to access capital.

In addition, if market conditions deteriorate due to economic, financial, political, health or other reasons which may increase competition for funding, the BOQ Group's funding costs may be adversely affected, and its ability to raise funding for lending activities and to maintain adequate liquidity levels may be constrained. There is no assurance that the BOQ Group will be able to obtain adequate funding at acceptable prices or at all, leading to an inability to maintain sufficient liquidity levels or to fund balance sheet growth in a timely and cost-effective way.

Funding and liquidity risk is the risk that the BOQ Group, although balance sheet solvent, cannot meet or generate sufficient cash resources to meet its payment obligations in full as they fall due, or can only do so at materially disadvantageous terms, including incurring a loss on a forced asset sale. Funding risk can occur due to an increase in competition for funding, or a change in risk premiums required by investors, which cause an increase in funding costs or increased difficulty accessing funding markets. The BOQ Group mitigates this risk by sourcing a diversified investor base through a number of different funding programmes in a number of different markets. Additionally, the BOQ Group's 'Contingency Funding Plan' is used to manage this risk.

The Issuer maintains a portfolio of high quality, diversified liquid assets to facilitate balance sheet liquidity needs and meet internal and regulatory requirements. Post the Committed Liquidity Facility handback, the Issuer has become more concentrated in High Quality Liquid Assets. The Issuer raises funding from a variety of sources, including customer deposits and wholesale funding in Australia and offshore markets to meet its funding obligations and to maintain or grow its business generally. If confidence in the Issuer is damaged and the Issuer's sources of funding prove to be insufficient or so expensive as to be uncompetitive, it may be forced to seek alternative funding arrangements or curtail its business operations and limit loan growth. The BOQ Group may also experience challenges in managing its capital base, which could give rise to greater volatility in capital ratios. The ability for the Issuer to secure alternative funding will depend on a variety of factors, including prevailing market conditions, the availability of credit and the Issuer's credit ratings.

The financial performance of the BOQ Group may also be significantly impacted by changes in monetary policy both in Australia and globally through the impact of broader economic conditions, as well as actions taken by central banks. The actions of central banks, such as interest rate settings and quantitative easing, can potentially impact the BOQ Group's access to funding markets, liquidity levels, cost of funding, margin on products and, as a result, could adversely impact the BOQ Group's financial performance, financial position, capital resources and prospects.

Challenges in managing capital base

The Issuer's capital base is critical to the management of its businesses and access to funding. The Issuer is required by APRA to maintain adequate regulatory capital determined by its risk profile. Capital risk is the risk that the Issuer does not hold sufficient capital and reserves to achieve strategic plans, cover exposures and to protect against unexpected losses, and to meet market expectations and regulatory requirements, both in normal operating environments or stressed conditions.

If the information or the assumptions upon which the BOQ Group's capital requirements are assessed prove to be inaccurate, this may adversely impact the BOQ Group's operations, financial performance and financial position. Under current regulatory requirements, risk-weighted assets and expected loan losses increase as a counterparty's risk grade worsens. These additional regulatory capital requirements compound any reduction in capital resulting from increased provisions for loan losses and lower profits in times of stress. As a result, greater volatility in capital ratios may arise and may require the Issuer to raise additional capital. There can be no certainty that any additional capital required would be available or could be raised on reasonable terms. Capital constraints could restrict the Issuer's ability to pay dividends (or pay a dividend below market expectations) or capital distributions, threaten financial viability and increase risk of regulatory intervention.

Regulatory change has led banks to progressively build capital and management buffers have been built to assist maintaining capital adequacy during stressed times and in preparation for the implementation of APRA's finalised Capital Framework which came into effect on 1 January 2023. Changes to regulatory frameworks and the requirement of the Issuer to hold more capital can have an adverse impact on the BOQ Group. Ineffective capital management could result in a negative impact on the BOQ Group's capital levels and potential regulatory action or enforcement should the BOQ Group not meet minimum regulatory requirements.

Credit ratings risk

Credit ratings are opinions on the BOQ Group's creditworthiness. Credit rating agencies may withdraw, revise or suspend credit ratings or change the methodology by which companies are rated. The BOQ Group's credit ratings affect the cost and availability of its funding from capital markets and other funding sources and they may be important to customers or counterparties when evaluating its products and services. Therefore, maintaining high quality credit ratings is important.

The credit ratings assigned to the BOQ Group and its subsidiaries by rating agencies are based on an evaluation of a number of factors, including financial strength, support from members of the BOQ Group and structural considerations regarding the Australian financial system. A credit rating downgrade could be driven by the occurrence of one or more of the other events identified as risks in this section of the Base Prospectus or by other events, including changes to the methodologies used by the rating agencies to determine ratings.

If the Issuer fails to maintain its current credit ratings, this could adversely affect the BOQ Group's cost of funds and related margins, competitive position and its access to capital and funding markets. This could adversely affect the BOQ Group's businesses, financial performance, liquidity, capital resources, financial condition and prospects. The extent and nature of these impacts would depend on various factors, including the extent of any ratings change, whether the ratings of the Issuer differ among agencies (split ratings) and whether any ratings changes also impact the BOQ Group's peers or the banking and insurance sectors more generally.

Market risk

The BOQ Group is exposed to market risk as a consequence of both its investments and trading activities in financial markets and through the asset and liability management of its balance sheet. The BOQ Group is exposed to losses arising from adverse movements in levels and volatility of market factors, including interest rates, foreign exchange rates, equity prices and credit spreads.

The BOQ Group, through its investment portfolios, is exposed to risk and volatility in the markets, securities and other assets in which it invests. Those risks include, but are not limited to:

·     Interest rate risk arising from a variety of sources, including mismatches between the repricing periods of assets and liabilities and the investment of the low cost deposit and capital portfolio. As a result of these mismatches, movements in interest rates (including material increases as central banks such as the Reserve Bank of Australia (the RBA) unwind stimulatory monetary policy settings) may affect earnings or the value of the BOQ Group;

·     Currency risk is the risk of loss of earnings or reduction in asset values due to adverse movements in foreign exchange rates;

·     Basis risk arising where the cash rate and bank bill rates do not move in tandem which arises primarily from variable retail assets repricing off the cash rate whilst the wholesale funding liabilities price off the bank bill rates. As a result of these mismatches between the base rate that assets price off and the base rate that liabilities price off, movements in basis markets may affect earnings or the value of the BOQ Group;

·     Asset/liability risk is the risk that the value of an investment portfolio will decrease relative to the value of the liabilities as a result of fluctuation in investment factors including share prices, interest rates, credit spreads, counterparty default, exchange rates or commodity prices; and

·     Liquidity risk including that assets cannot be sold without a significant impairment in value.

Such risks can be heightened during periods of high volatility, market disruption and periods of sustained low interest rates and if the BOQ Group was to suffer substantial losses due to any market volatility, it could adversely affect the BOQ Group's financial performance, financial position, capital resources and prospects.

Operational risk

Operational risk is the risk of loss, other than those captured in the credit and market risk categories, resulting from inadequate or failed internal processes, people or systems (including information security systems), or from external events.

The BOQ Group is exposed to a variety of risks including those arising from process error, fraud, technology failure, security and physical protection, franchise agreements entered into with owners of the Owner Managed Branches (OMBs), customer services, staff skills, workplace safety, compliance, business continuity, crisis management, processing errors, mis-selling of products and services and performance and product development and maintenance. Financial crime, in particular, is an inherent risk within the financial services industry. In response to the COVID-19 pandemic, a proportion of the Issuer's workforce commenced working from home, with the number of employees working from home continuing to be higher than prior to the onset of the COVID-19 pandemic, with flexible working arrangements likely to continue. This exposes the Issuer to additional operating risk, including increased risk of fraud, technology and related risks and employee health and safety risks and the Issuer may suffer financial loss if the Issuer fails to monitor, detect and control potentially suspicious financial crime activity.

The Issuer manages these operational risks through appropriate reporting lines, defined responsibilities, policies and procedures and an operational risk framework incorporating regular risk monitoring and reporting by each business unit. Operational risks are documented in centralised risk databases which provide the basis for business unit and bank-wide risk profiles, the latter being reported to the BOQ Group's Risk Committees on a regular basis. Although these steps are in place, there is no guarantee that the BOQ Group will not suffer loss as a result of these risks (and an inherent risk also exists due to systems and internal controls failing to identify or prevent losses relating to these operational risks). Such losses can include fines, penalties, loss or theft of funds or assets, customer compensation, loss of shareholder value, reputational losses, loss of life or injury to people and loss of property and information. Loss from such risks could affect the BOQ Group's financial performance, financial position, capital resources and prospects.

The BOQ Group includes a number of subsidiaries that are trading entities. Dealings and exposures between the members of the BOQ Group (which principally arise through the provision of administrative, corporate and distribution services, as well as through the provision of funding and equity contributions) also give rise to a risk of loss to the Issuer.

Reputation risk

Reputation risk may arise through the actions of the Issuer or other financial services market participants and adversely affect perceptions of the Issuer held by the public, holders of its securities, regulators or rating agencies or political bodies such as government. These actions could include inappropriately dealing with conflicts of interests, pricing policies, compliance with legal and regulatory requirements, ethical issues, conduct risk issues, litigation, compliance with anti-money laundering laws and laws to prevent financial crime, employment laws, compliance with trade sanctions legislation, compliance with privacy laws, information security policies, sales and trading practices, technology failures, security breaches and risk management failures. Damage to the Issuer's reputation may have an adverse impact on the Issuer's financial performance, financial position, capital resources and prospects. This is in addition to any regulatory sanctions that may be imposed from the same conduct or issues.

Changes in technology

In order to continue to deliver new products and better services to customers, comply with regulatory obligations (such as obligations to report certain data and information to regulators) and meet the demands of customers in a highly competitive banking environment, the Issuer needs to regularly renew and continually enhance its technology.

Currently there are strategic technology programs underway as part of the Issuer's digital transformation across the Issuer's retail, business bank and supporting infrastructure, that are critical to delivery of the Issuer's overarching strategy to simplify and modernise its technology infrastructure, application and operations environment. These programs comprise both maintenance and remedial activity to ensure the Issuer's technology environment remains compliant, secure and stable, and transformational activity to drive customer growth and improve efficiency.

Failure to successfully deliver these programs could result in substantial cost overruns, unrealised productivity, additional operational and system costs, failure to meet compliance obligations, reputational damage and/or result in the loss of market share to competitors.

The delivery, non-delivery or delayed delivery of these strategic programs can have a direct impact on the BOQ Group's financial performance.

Cyber security risks

The Issuer is highly dependent on information systems and technology, a number of which are outsourced or provided by third parties. Therefore, there is a risk that these, or the services the Issuer uses or is dependent upon (including those provided by third parties), might fail, including because of unauthorised access or use. Most of the Issuer's daily operations are computer-based and information systems applications and technology are essential to maintaining effective communications with customers. The Issuer is also conscious that threats to information systems applications and technology are continuously evolving and cyber threats and risk of attacks are increasing due to increased use of the internet and telecommunications to conduct financial transactions, growing sophistication of attackers and global increase in cyber crime. A number of recent examples have occurred in Australia.

Cyber security means protecting the cyber environment and information from threats including unauthorised access, use, disclosure, disruption, modification, perusal, inspection, recording or destruction. By its nature, the Issuer handles a considerable amount of personal and confidential information about its customers. The exposure to systems risks include the complete or partial failure of information technology systems due to, among other things, failure to keep pace with industry developments and the capacity of the existing systems to effectively accommodate growth, prevent unauthorised access and integrate existing and future acquisitions and alliances, such as the acquisition of ME. There is a risk that information and data may be inadvertently or inappropriately accessed or distributed or illegally accessed or stolen. This could be a direct attack on the Issuer or an attack on one the Issuer's third party suppliers who manage the Issuer's data or have access to the Issuer's information systems, applications or technology.

To manage these risks, the Issuer employs a cyber security team which is responsible for the development and implementation of the Issuer's information security policies, operational procedures and cyber security specialist partners. The Issuer is conscious that threats to cyber security are continuously evolving and as such the Issuer conducts regular internal and external reviews to ensure new threats are identified, evolving risks are mitigated, policies and procedures are updated and good practice is maintained. However, the Issuer may not be able to anticipate all attacks as they may be dynamic in nature or implement effective measures to prevent or minimise disruptions that may be caused by all cyber threats because the techniques used can be highly sophisticated and those perpetuating the attacks may be well resourced.

As there can be no guarantee that the steps taken by the Issuer to manage the risks will be fully effective, any failure of these systems or a successful cyberattack could result in a number of potential consequences including business interruption, damage to technology infrastructure, loss of data or information, customer dissatisfaction, legal or regulatory breaches and liability including fines or penalties, loss of customers, financial compensation or remediation, class actions and need for significant additional resources to modify and enhance the Issuer's systems and investigate and remediate any incidents.

All of these consequences could have regulatory impacts, cause damage to the Issuer's reputation and/or a weakening of the Issuer's competitive position, which could adversely impact the Issuer's financial performance, financial position, capital resources and prospects. 

Failure to recruit and retain key executives, employees and directors

The Issuer's ability to attract and retain qualified and skilled executives, employees and directors is critical to the success of the Issuer's business and its pursuit of its strategic objectives. The success of the Issuer's recruitment and retention practices, remuneration and talent and success planning will have an impact on the Issuer's ability to attract and retain qualified and skilled employees. The unexpected departure of an individual in a key role, or the Issuer's failure to recruit and retain appropriately skilled and qualified persons into these roles, could each have an adverse effect on the Issuer's ability to operate its business efficiently, its ability to execute on its strategy, its prospects, reputation, financial performance or financial condition. It may also have an impact on the BOQ Group's ability to maintain an effective risk management framework.

 

Emerging risks include low unemployment, reduced migration levels of skilled workers, new flexible ways of working, introduction of AI, wages pressure and a highly competitive talent market (with competition from both within and outside of financial services), which are all having a significant impact on the ability of the BOQ Group to hire and retain qualified and skilled employees. This may result in the BOQ Group having to pay employees at or above market levels which in turn could have adverse impacts on the Issuer's financial performance, financial position, capital resources and prospects.

 

Breach of industrial practices

 

Failure by an employer to comply with relevant employment laws, awards or enterprise agreements can lead to potential regulatory investigations or enforcement actions or other civil or criminal fines or penalties. As disclosed on 29 September 2020, the Issuer identified irregularities in superannuation payments and potential underpayment and entitlement issues relating to employees employed under the 2010, 2014 and 2018 Enterprise Agreements.

 

While the Issuer has undertaken significant work, with the assistance of external third parties, to estimate the likely costs to remediate any underpayments plus associated costs, the work and analysis, together with ongoing engagement with the Fair Work Ombudsman (FWO) and Financial Services Union, will continue throughout 2023 or longer depending on any enforcement action. Accordingly, there is a risk that the full impact may differ from the amount for which the Issuer has currently provisioned. Given the time required to undertake this work and the FWO deliberations, it is not yet possible to fully determine what enforcement action, if any, FWO may take but could include an enforceable undertaking.

 

There is also a risk of further regulatory enforcement action and associated penalty payments in relation to these underpayments for which the Issuer has included an estimate in the current provision.

Changes to accounting policies and/or methods in which they are applied may adversely affect the Issuer's business, operations and financial condition

The accounting policies and methods that the Issuer applies are fundamental to how it records and reports its financial position and results of operations. Management of the Issuer must exercise judgment in selecting and applying many of these accounting policies and methods as well as estimates and assumptions applied so that they not only comply with generally accepted accounting principles, but they also reflect the most appropriate manner in which to record and report on the financial position and results of operations.

These estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Insurance risk

The BOQ Group maintains insurance that it considers to be prudent for the scope and scale of its activities. If the BOQ Group's third-party providers fail to perform their obligations and/or its third-party insurance cover is insufficient for a particular matter or group or related matters, the net loss to the BOQ Group could adversely impact the Issuer's financial performance, financial position, capital resources and prospects.

Strategic risk

 

Strategic risk is the risk associated with the pursuit of the Issuer's strategic objectives in a dynamic environment. There is a risk that the strategic objectives of the Issuer may not achieve or realise the Issuer's key priorities. If the business does not perform as anticipated or if there are changes in the business, economic, legislative or regulatory environment, wholesale or retail funding markets or customer behaviour changes, this may also affect the effectiveness of any strategy.

 

This includes risk associated with strategic opportunities, including acquisitions, divestments and restructuring of existing businesses as well as simplification, transformational investment and innovation initiatives. Each of these activities can be complex, costly and time consuming and require the BOQ Group, its directors and senior management to make strategic choices about where to place the BOQ Group's investment expenditure and how to use its capital.

 

Pursuing a growth strategy, organic or inorganic (through acquisitions, divestments or other transactions) can place significant demand on the Issuer's legal, compliance, finance, IT and risk management teams and risks disruption to existing businesses and the operations of the Issuer, including possible changes in key executives and employees. Strategic risk extends to internal business choices made in a timely manner covering product development, pricing, processes, resource allocation and investment. These all impact the performance and ability to deliver on the strategic ambitions for the BOQ Group.

 

A failure to execute the Issuer's strategic objectives may result in a failure to achieve anticipated benefits and ultimately adversely impact the Issuer's operations, reputation, financial performance, financial position, ability to pay future dividends or capital distributions, capital resources and prospects. Executing on multiple transactions and/or initiatives can intensify this risk as well as accelerating large-scale transformation execution. There is also the risk that other strategic opportunities are missed.

Implementation of digital transformation strategy

The Issuer has previously announced its digital transformation strategy to simplify and modernise its technology infrastructure, applications and operations environment. The Issuer's investment in this transformation program is critical to simplifying its technology and automating its manual processes. These programmes of work comprise both maintenance and remedial activity to ensure the technology environment remains secure and stable, and transformational activity to drive customer growth such as the build out of a new digital bank and the move to cloud.

While significant progress has been made through its partnership with key global technology partners such as Temenos and Microsoft, with benefits emerging, the Issuer is currently still operating on multiple legacy systems and platforms meaning lower cost to income ratios will not be fully realised until duplication has been removed.

There continues to be a risk that the costs and expenses associated with implementing the digital transformation are not managed as planned and/or the implementation timelines are extended. The increased costs or extended timeframes could have an adverse effect on the Issuer's financial performance, financial position, ability to pay future dividends or capital distributions, capital resources and prospects. There is also the risk that the benefits of the digital transformation are not as anticipated including lower than expected customer growth and a failure to achieve significant improvements in cost-to-income ratios. Should the Issuer not execute its digital transformation, it will be required to continue with complex legacy systems, including those used in risk management frameworks and manual processes and controls. This could lead to the Issuer underperforming market expectations regarding growth, costs and profit, which may have an impact on the Issuer's financial performance, financial position, capital resources and prospects.

Increased industry competition

There is substantial competition for the provision of financial services in the markets in which the Issuer operates. Existing participants (including as a result of merger or consolidation activity) or potential new entrants to the market, especially in the Issuer's main markets and products, could heighten competition and reduce margins or increase costs of participation, which would adversely affect the BOQ Group's financial performance and position.

Competition is expected to increase including from non-Australian financial services providers as well as new non-bank entrants who may be unregulated or subject to lower prudential or regulatory standards than the Issuer and may be able to operate more efficiently.

Ongoing consolidation in the financial services sector, including in the banking sector, has the potential to change the competitive environment, increase competition and to create different competitive opportunities and threats, all which may have a negative impact on the Issuer. There is no guarantee that the Issuer will be able to participate in any further industry consolidation and the ability for the Issuer to be able to take advantage of any associated competitive opportunities, or to respond to any competitive threats, is uncertain.

As the financial services industry is a licensed and regulated industry, the prudential framework across industry participants creates its own challenges and any changes in the regulatory environment can potentially influence the industry's competitive dynamic.

If the Issuer is unable to compete effectively in its business segments and markets, its market share may decline placing pressure on margins, which may in turn adversely affect the BOQ Group's financial performance, financial position, capital resources and prospects.

Conduct risk

Conduct risk is the risk that the Issuer's provision of products and services results in unsuitable or unfair outcomes for its customers and/or undermines market integrity. Conduct risk could occur through the provision of products and services to the Issuer's customers that do not meet their needs or that are not appropriate for them or that do not support market integrity, as well as the poor conduct of the Issuer's employees, contractors, agents, authorised representatives and external service providers, which could include deliberate attempts by such individuals to circumvent the Issuer's controls, processes and procedures. This could occur through a failure to meet professional obligations to specific clients (including suitability requirements), poor product design and distribution, failure to adequately consider customer needs or selling products and services outside of customer target markets. Conduct risk may also arise where there has been a failure to adequately provide a product or services that the Issuer had agreed to provide a customer.

While the Issuer has frameworks, policies, processes and controls that are designed to mitigate the risk of poor conduct outcomes, these policies and processes may not always have been or continue to be effective. The failure of these policies and processes could result in financial losses, regulatory fines and reputational damage, as well as remediation costs to improve policies and processes. This could adversely affect the Issuer's financial performance, financial position, capital resources and prospects.

Reliance on external parties

The Issuer's operations depend on performance by a number of external parties operating under contractual arrangements with the Issuer. Examples include:

·          The Issuer's OMBs network and brokers. For example, non-performance of contractual obligations and poor operational performance of OMBs, who operate the majority of the Issuer's retail branches, the Issuer's broker partners, may have an adverse effect on the Issuer's business and financial performance.

·          The risk of relying on third parties to review and advise on improvements to processes and practices should such advice or guidance be incorrect or fail to meet legal or regulatory requirements or regulator expectations or lead to litigation or class actions.

·          The Issuer also has key outsourcing agreements including in relation to its IT platforms and systems where certain activities or products can be more effectively provided by suppliers. Although the Issuer has taken steps to protect it from the effects of defaults, inadvertent loss of data, breaches of privacy or breaches of security under these contractual arrangements and outsourcing agreements, such defaults, losses or breaches may have an adverse effect on the Issuer's business continuity and financial performance and could additionally lead to a loss of customer, employee or commercially sensitive data, regulatory fines or penalties and/or reputational damage. There is also a risk that one of the Issuer's suppliers will suffer a cyber threat or cyber attack that may disrupt the Issuer's business operations, damage its technology infrastructure or cause loss of data or information.

A risk of relying on third parties to provide the Issuer's core platforms and other operating requirements is the risk of disputes arising under such contractual arrangements that may lead to early termination of such arrangements which may cause financial loss or damage to the Issuer, cause material interruptions to the Issuer's business and operations and/or lead to loss of the Issuer's licenses or permits to operate.

 

Litigation and regulatory proceedings

The Issuer (like all entities in the banking, insurance or finance sectors) is exposed to the risk of litigation and/or regulatory reviews, investigations or proceedings brought by or on behalf of its customers, policyholders, reinsurers, government agencies (including regulators) or other potential claimants. If the BOQ Group fails to meet its legal or regulatory requirements, or the requirements of industry codes of practice (such as the Banking Code of Practice), or its ethical standards, it may be exposed to fines, public censure, litigation, settlements, restitution and remediation to customers, regulators or other stakeholders, or enforced suspension of operations or loss of licence to operate all or part of the BOQ Group's business.

The BOQ Group may be exposed to risks relating to design and distribution of its products and services, and/or the provision of advice, recommendations or guidance about those products and services, or behaviours which do not appropriately consider the interests of customers, the integrity of the financial markets and the expectations of the community, in the course of its business activities.

 

In recent years there have been significant increases in the nature and scale of regulatory investigations and reviews, enforcement actions (whether by court action or otherwise) and the quantum of fines issued by regulators, particularly against financial institutions both in Australia and globally. The nature of those investigations, reviews and enforcement actions can be wide ranging and, for example, have included and currently include a range of matters including responsible lending practices, anti-money laundering and counter terrorism financing, product suitability, wealth advice, operational risk, compliance and risk culture  and conduct in financial markets and capital markets transactions.

 

As has been disclosed to the market, on 25 May 2021, the Commonwealth Director of Public Prosecution commenced proceedings against ME in relation to alleged contraventions of the National Credit Code and the ASIC Act. As at the date of this Prospectus, those proceedings remain on foot.

 

As noted in "Risk Factors - Regulatory, legal and compliance risk - Regulation in Australia", internal and external reviews identified that a material uplift is required in respect of the Issuer's operational resilience, risk culture and AML/CTF Program and compliance.

 

There is a risk that the outcome of ongoing engagement with regulators in respect of the matters above will involve regulators imposing fines, sanctions or taking other enforcement actions in relation to the BOQ Group's compliance with relevant laws and regulations.

Additionally, there can be no assurance that significant litigation will not arise in the future and that the outcome of legal proceedings from time to time will not have an adverse effect on the BOQ Group's businesses, financial performance, financial condition or prospects.

RISK FACTORS THAT MAY AFFECT THE COVERED BOND GUARANTOR'S ABILITY TO FULFIL ITS OBLIGATIONS UNDER THE COVERED BONDS ISSUED UNDER THE PROGRAMME

There is limited recourse to the Covered Bond Guarantor.

The Assets of the Trust will be the sole source of payments by the Covered Bond Guarantor under the Programme Documents (including under the Covered Bond Guarantee). The Covered Bond Guarantor's personal assets or any other assets held as trustee of another trust will not be available to make such payments unless, in the case of personal assets, there is a reduction in the extent of the Covered Bond Guarantor's indemnification out of the Assets of the Trust as a result of the Covered Bond Guarantor's fraud, negligence or wilful default. Therefore, if the Assets of the Trust are insufficient to enable the Covered Bond Guarantor to meet its obligations (including in respect of the Covered Bond Guarantee), this may affect the timing or amount of interest and principal payments under the Covered Bonds following an Issuer Event of Default and service of a Notice to Pay on the Covered Bond Guarantor.

The Covered Bond Guarantor is only obliged to pay Guaranteed Amounts when the same are Due for Payment.

Subsequent to an Issuer Event of Default that is continuing, the Bond Trustee at its discretion may, and if so requested in writing by the holders of at least 25 per cent. of the Australian Dollar Equivalent of the aggregate Principal Amount Outstanding of the Covered Bonds then outstanding or if so directed by an Extraordinary Resolution of the Covered Bondholders will, subject to being indemnified and/or secured and/or prefunded to its satisfaction, give an Issuer Acceleration Notice to the Issuer (copied to the Covered Bond Guarantor) that as against the Issuer (but not, for the avoidance of doubt, as against the Covered Bond Guarantor) each Covered Bond will thereupon immediately become due and repayable at its Early Redemption Amount together with accrued interest.

Upon the Covered Bonds becoming immediately due and repayable against the Issuer, the Bond Trustee will forthwith serve a Notice to Pay on the Covered Bond Guarantor (copied to the Trust Manager and the Security Trustee) and the Covered Bond Guarantor will be required to make payments of Guaranteed Amounts when the same will become Due for Payment in accordance with the terms of the Covered Bond Guarantee.  The Covered Bond Guarantor will have no obligation to pay the Guaranteed Amounts payable under the Covered Bond Guarantee prior to receipt of an Issuer Acceleration Notice and Notice to Pay.

Following service of a Notice to Pay on the Covered Bond Guarantor (copied to the Trust Manager and the Security Trustee) the Covered Bond Guarantor must pay or procure to be paid on each Scheduled Payment Date to or to the order of the Bond Trustee (for the benefit of Covered Bondholders) an amount equal to those Guaranteed Amounts which have become Due for Payment in accordance with the terms of the Bond Trust Deed but which have not been paid by the Issuer provided that no Notice to Pay may be served on the Covered Bond Guarantor until an Issuer Acceleration Notice has been served by the Bond Trustee on the Issuer.

All payments of Guaranteed Amounts by the Covered Bond Guarantor will be made without withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of Australia or any political sub-division thereof or by any authority therein or thereof having power to tax unless such withholding or deduction is required by law or regulation or administrative practice of any jurisdiction.  In the event of a withholding or deduction being made by the Covered Bond Guarantor, the Covered Bond Guarantor will not be obliged to pay any additional amounts as a consequence.  In addition, the Covered Bond Guarantor will not be obliged at any time to make any payments in respect of additional amounts which may, had the Issuer been making payments on the Covered Bonds, have become payable by the Issuer under Condition 7. Prior to service on the Covered Bond Guarantor of a Covered Bond Guarantee Acceleration Notice, the Covered Bond Guarantor will not be obliged to make payment in respect of any additional amounts relating to prepayments, early redemption, broken funding indemnities, penalties, premiums, default interest or interest upon interest which may accrue on or in respect of the Covered Bonds.

Subject to any grace period, if the Covered Bond Guarantor fails to make a payment when Due for Payment under the Covered Bond Guarantee or any other Covered Bond Guarantor Event of Default occurs and is continuing, then the Bond Trustee may, and if so requested in writing by the holders of at least 25 per cent. of the Australian Dollar Equivalent of the aggregate Principal Amount Outstanding of the Covered Bonds then outstanding or if so directed by an Extraordinary Resolution of the Covered Bondholders will, subject to being indemnified and/or secured and/or prefunded to its satisfaction, accelerate the obligations of the Covered Bond Guarantor under the Covered Bond Guarantee by service of a Covered Bond Guarantee Acceleration Notice, whereupon the Bond Trustee will have a claim under the Covered Bond Guarantee for an amount equal to the Early Redemption Amount of each Covered Bond, together with accrued interest and all other amounts then due under the Covered Bonds (other than additional amounts payable under Condition 7, although in such circumstances the Covered Bond Guarantor will not be obliged to gross up in respect of any withholding which may be required in respect of any payment).  Following service of a Covered Bond Guarantee Acceleration Notice, the Security Trustee may enforce the Security over the Charged Property.  The proceeds of enforcement and realisation of the Security will be applied by the Security Trustee in accordance with the Post-Enforcement Priority of Payments in the Security Deed, and Covered Bondholders will receive amounts from the Covered Bond Guarantor on an accelerated basis.

There is no guarantee that the Covered Bond Guarantor will be able to satisfy its obligations to make payments under the Covered Bond Guarantee. Should the Covered Bond Guarantor be unable to meet the claims of Covered Bondholders under the Covered Bond Guarantee, the interests of Covered Bondholders may be adversely affected and Covered Bondholders may not receive payment in full of all amounts due in respect of the Covered Bonds held by them.

The obligations under the Covered Bond Guarantee in respect of a Series of Covered Bonds may be extendable for a period of up to 31.5 years.

The Applicable Final Terms for a Series of Covered Bonds (or, in the case of a Series of Exempt Covered Bonds, the Applicable Pricing Supplement) will provide that such Covered Bonds are subject to an Extended Due for Payment Date, being the earlier of (a) the date which falls 31.5 years after the Final Maturity Date in relation to that Series of Covered Bonds; (b) the date which falls 31.5 years after the Conversion of that Series of Covered Bonds; and (c) the date which falls 31.5 years after the Conversion Event Date.

Accordingly (subject to no Conversion or Covered Bond Guarantor Event of Default having occurred), following the failure by the Issuer to pay, in full, the Final Redemption Amount of the relevant Series of Covered Bonds on their Final Maturity Date (subject to applicable grace periods) and if, following the service of a Notice to Pay on the Covered Bond Guarantor (by no later than the date which falls one Business Day prior to the Extension Determination Date), payment of the Guaranteed Amounts corresponding to the unpaid portion of such Final Redemption Amount in respect of the relevant Series of Covered Bonds are not paid in full by the earlier of (a) the date which falls two Business Days after service of such Notice to Pay on the Covered Bond Guarantor or, if later, the Final Maturity Date (or, in each case, after the expiry of the grace period set out in Condition 9(a)(i)) under the terms of the Covered Bond Guarantee and (b) the Extension Determination Date, then the payment of such Guaranteed Amounts will be automatically deferred to the Extended Due for Payment Date for the relevant Series of Covered Bonds and such Covered Bonds will become Pass-Through Covered Bonds.  The Trust Manager is required to notify the Covered Bondholders in accordance with Condition 13 of such deferral (but failure to do so does not affect the validity or effectiveness of the extension).

To the extent that the Covered Bond Guarantor has received a Notice to Pay in sufficient time and has sufficient moneys available to pay in whole or in part the Guaranteed Amounts corresponding to the relevant unpaid portion of the Final Redemption Amount in respect of the relevant Series of Pass-Through Covered Bonds, the Covered Bond Guarantor will be required to make such payment in accordance with the Guarantee Priority of Payments and as described in Condition 6(a).  Payment of the unpaid amount will be deferred automatically until the applicable Extended Due for Payment Date, provided that any amount representing the Final Redemption Amount due and remaining unpaid on the earlier of (a) and (b) in the preceding paragraph may also be paid by the Covered Bond Guarantor (at the direction of the Trust Manager) on any Interest Payment Date thereafter up to (and including) the Extended Due for Payment Date. 

In addition, if, prior to the Conversion Event Date, (a) an Issuer Event of Default has occurred (x) in accordance with Condition 9(a) (other than in accordance with Condition 9(a)(i) as a result of a failure to pay the Final Redemption Amount in respect of a Series of Covered Bonds) and the Bond Trustee has served a Notice to Pay on the Covered Bond Guarantor or (y) in accordance with Condition 9(a)(i) as a result of a failure to pay the Final Redemption Amount in respect of a Series of Covered Bonds and such Series of Covered Bonds has been redeemed in full and (b) at such time there are no Pass-Through Covered Bonds then outstanding, then (subject as provided below) payment of the Final Redemption Amount in respect of the then Earliest Maturing Covered Bonds by the Covered Bond Guarantor under the Covered Bond Guarantee will be deferred until the Extended Due for Payment Date (and such Earliest Maturing Covered Bonds will become Pass-Through Covered Bonds).  In such circumstances, the Covered Bond Guarantor is required, on the next and each following Interest Payment Date, under the Covered Bond Guarantee, to apply the moneys (if any) available on a Distribution Date (after paying or providing for payment of higher ranking or pari passu amounts in accordance with the Guarantee Priority of Payments) rateably in part payment of an amount equal to the Final Redemption Amount of the then Earliest Maturing Covered Bonds (and to such extent, the Final Redemption Amount will, for the purpose of the Guarantee Priority of Payments and all other purposes, be due) and will pay Guaranteed Amounts constituting the Scheduled Interest in respect of the then Earliest Maturing Covered Bonds on such Interest Payments Dates.  The obligation of the Covered Bond Guarantor to pay any amounts in respect of the balance of the Final Redemption Amount not so paid on such Interest Payments Date for such Earliest Maturing Covered Bonds will be deferred as described above and such failure to pay by the Covered Bond Guarantor will not constitute a Covered Bond Guarantor Event of Default, provided that any amount representing the Final Redemption Amount remaining unpaid may also be paid by the Covered Bond Guarantor (at the direction of the Trust Manager) on any Interest Payment Date thereafter up to (and including) the Extended Due for Payment Date. Once the then Earliest Maturing Covered Bonds are repaid in full, the above will then apply to the next Earliest Maturing Covered Bonds.

All Series of Covered Bonds will convert to Pass-Through Covered Bonds immediately upon the Conversion Event Date, being the date on which an Amortisation Test Breach Notice is served on the Covered Bond Guarantor and the Issuer, following the service of a Notice of Pay on the Covered Bond Guarantor. Following the Conversion Event Date (subject to no Covered Bond Guarantor Event of Default having occurred and subject as provided below), payment of the unpaid amount in respect of all Series of Covered Bonds by the Covered Bond Guarantor under the Covered Bond Guarantee will be deferred until the Extended Due for Payment Date. The Covered Bond Guarantor (at the direction of the Trust Manager) must on the next, and each following Interest Payment Date for each Series of Covered Bonds, apply the moneys (if any) available for that Series of Covered Bonds on a Distribution Date (after paying or providing for payment of higher ranking or pari passu amounts in accordance with the Guarantee Priority of Payments) towards payment, in whole or part, of the Final Redemption Amount of that Series of Covered Bonds (and to such extent, the Final Redemption Amount will, for the purpose of the Guarantee Priority of Payments and all other purposes, be due) on such Interest Payment Date.

The Covered Bond Guarantor will also pay Guaranteed Amounts constituting Scheduled Interest in respect of each Series of Pass-Through Covered Bonds on the basis set out in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement) or, if not set out therein, in accordance with Condition 4, without prejudice to the Covered Bond Guarantor's obligation to pay any other Guaranteed Amount (i.e. other than the Final Redemption Amount) when Due for Payment.

In each of the circumstances set out above, except where the Covered Bond Guarantor has failed to apply money in accordance with the Guarantee Priority of Payments, failure by the Covered Bond Guarantor to make payment in respect of the Final Redemption Amount on the Final Maturity Date in respect of a Series of Covered Bonds (or such later date within any applicable grace period) will not constitute a Covered Bond Guarantor Event of Default.  However, failure by the Covered Bond Guarantor to pay Guaranteed Amounts corresponding to the Final Redemption Amount or the balance thereof, as the case may be, on the Extended Due for Payment Date in respect of a Series of Covered Bonds and/or pay Guaranteed Amounts constituting Scheduled Interest on any Original Due for Payment Date up to and including the Extended Due for Payment Date in respect of a Series of Covered Bonds will (subject to any applicable grace period) be a Covered Bond Guarantor Event of Default.

The Final Maturity Dates for different Series of Covered Bonds may not be the same.  In the case of a Series of Covered Bonds, if the principal amounts have not been repaid in full by the Extension Determination Date, then the repayment of unpaid principal amounts will be deferred until the Extended Due for Payment Date. 

The Extended Due for Payment Dates for different Series of Covered Bonds may not be the same.  On each Distribution Date following the service of a Notice to Pay on the Covered Bond Guarantor (but prior to the service of a Covered Bond Guarantee Acceleration Notice), the Covered Bond Guarantor will apply the Available Income Amount and the Available Principal Amount in accordance with the Guarantee Priority of Payments.  To the extent that the amount available for distribution under the Guarantee Priority of Payments would be insufficient to pay the Scheduled Interest, the Scheduled Principal or the Final Redemption Amount of any Series of Covered Bonds to which an Extended Due for Payment Date applies, the shortfall will be divided amongst all such Series of Covered Bonds on a pari passu and rateable basis.

Prior to the occurrence of a Conversion, the Covered Bond Guarantor will be entitled to apply the Available Principal Amount in order to repay earlier maturing Series of Covered Bonds, which may mean that there may be fewer assets available to support later maturing Series of Covered Bonds.

Payments by the Covered Bond Guarantor may be treated as interest for Australian withholding tax purposes.

It is possible that payments by the Covered Bond Guarantor that relate to interest on the Covered Bonds would be treated as interest for Australian withholding tax purposes and therefore subject to withholding tax.  Please refer to the section "Taxation - Australian Taxation - Payments by the Covered Bond Guarantor" of this Prospectus. Investors should be aware that in the event payments by the Covered Bond Guarantor are subject to any withholding or deduction for or on account of tax, the Covered Bond Guarantor will not be required to pay any additional amounts to Covered Bondholders.

Excess proceeds received by the Bond Trustee will be paid to the Covered Bond Guarantor following the occurrence of an Issuer Event of Default.

Following the occurrence of an Issuer Event of Default and service by the Bond Trustee of an Issuer Acceleration Notice any Excess Proceeds received by the Bond Trustee on behalf of the Covered Bondholders of the relevant Series will be paid to the Covered Bond Guarantor, as soon as practicable, and must be held by the Covered Bond Guarantor in the GIC Account and the Excess Proceeds will thereafter form part of the Security and will be used by the Covered Bond Guarantor in the same manner as all other moneys from time to time standing to the credit of the GIC Account.  Any Excess Proceeds received by the Bond Trustee will discharge pro tanto the obligations of the Issuer in respect of the Covered Bonds and Coupons (subject to restitution of the same if such Excess Proceeds will be required to be repaid by the Covered Bond Guarantor).  However, the obligations of the Covered Bond Guarantor under the Covered Bond Guarantee are (following service of an Issuer Acceleration Notice and a Notice to Pay or, if earlier, a Covered Bond Guarantee Acceleration Notice) unconditional and irrevocable and the receipt by the Bond Trustee of any Excess Proceeds will not reduce or discharge any such obligations.

By subscribing for Covered Bonds, each Covered Bondholder will be deemed to have irrevocably directed the Bond Trustee to pay the Excess Proceeds to the Covered Bond Guarantor for application in the manner as described above.

There are finite resources available to the Covered Bond Guarantor to make payments due under the Covered Bond Guarantee.

Following service by the Bond Trustee of an Issuer Acceleration Notice on the Issuer (copied to the Covered Bond Guarantor), all amounts payable under the Covered Bonds will be accelerated by the Bond Trustee as against the Issuer and a Notice to Pay must be served by the Bond Trustee on the Covered Bond Guarantor (copied to the Trust Manager and the Security Trustee).  The Covered Bond Guarantor's ability to meet its obligations under the Covered Bond Guarantee will depend on: (i) the realisable value of the sale of Selected Mortgage Loan Rights; (ii) the amount of Principal Collections and Finance Charge Collections generated by the Mortgage Loan Rights forming part of the Assets of the Trust and the timing thereof; (iii) amounts received from the Swap Providers; (iv) the realisable value of Substitution Assets and Authorised Investments held by it; and (v) the receipt by it of credit balances and interest on credit balances on the GIC Account.  Recourse against the Covered Bond Guarantor under the Covered Bond Guarantee is limited to the extent of its right of indemnity from the Assets of the Trust (including as described in the foregoing) (except to the extent of any reduction in the extent of the Covered Bond Guarantor's right of indemnity as a result of the Covered Bond Guarantor's fraud, negligence or wilful default) and the Covered Bond Guarantor will not have any obligation to use its own funds or any other assets held by it (except in those limited circumstances) to meet its obligations under the Covered Bond Guarantee.

If a Covered Bond Guarantee Acceleration Notice is served on the Covered Bond Guarantor and the Issuer and the Security created by or pursuant to the Security Deed is enforced, the realisation of the Charged Property may not be sufficient to meet the claims of all the Secured Creditors, including the Covered Bondholders.

If, following enforcement of the Security constituted by or pursuant to the Security Deed, the Covered Bondholders have not received the full amount due to them pursuant to the terms of the Programme Documents, then they may still have an unsecured claim against the Issuer for the shortfall.  There is no guarantee that the Issuer will have sufficient funds to pay that shortfall.

Covered Bondholders should note that the Asset Coverage Test has been structured to ensure that the Adjusted Aggregate Mortgage Loan Amount is at least equal to the Australian Dollar Equivalent of the aggregate Principal Amount Outstanding of the Covered Bonds for so long as Covered Bonds remain outstanding (prior to service of a Notice to Pay or, if earlier, a Covered Bond Guarantee Acceleration Notice on the Covered Bond Guarantor and the Issuer), which should reduce the risk of there ever being a shortfall in amounts to pay the Covered Bondholders (although there is no assurance of this - in particular, the sale of further Mortgage Loan Rights by the Seller to the Covered Bond Guarantor or other action may be required to avoid or remedy any non-satisfaction or breach of the Asset Coverage Test).

The Trust Manager will be required to ensure that, following the service of a Notice to Pay on the Covered Bond Guarantor (but prior to the service of a Covered Bond Guarantee Acceleration Notice on the Covered Bond Guarantor and the Issuer), the Amortisation Test is met on each relevant Determination Date.  The Trust Manager must immediately notify the Covered Bond Guarantor, the Security Trustee and (for so long as Covered Bonds are outstanding) the Bond Trustee of any breach of the Amortisation Test and the Bond Trustee must serve an Amortisation Test Breach Notice on the Issuer and the Covered Bond Guarantor. The service of an Amortisation Test Breach Notice on the Covered Bond Guarantor and the Issuer (following service of a Notice to Pay on the Covered Bond Guarantor), will result in all Series of Covered Bonds converting to Pass-Through Covered Bonds.

The Asset Coverage Test, the Amortisation Test, the Interest Rate Shortfall Test and the Yield Shortfall Test have in the aggregate been structured to ensure that the Assets forming part of the Trust are sufficient to pay amounts due on the Covered Bonds and senior expenses (which will include costs relating to the maintenance, administration and winding-up of the Asset Pool whilst the Covered Bonds are outstanding).  However no assurance can be given that the Assets forming part of the Trust will in fact generate sufficient amounts for such purposes (see "Overview of the Principal Documents - Establishment Deed - Asset Coverage Test" and "Credit Structure - Asset Coverage Test", "Overview of the Principal Documents - Establishment Deed - Amortisation Test" and "Credit Structure - Amortisation Test", "Overview of the Principal Documents - Servicing Deed - Interest Rate Shortfall Test" and "Overview of the Principal Documents - Servicing Deed - Yield Shortfall Test").

The Covered Bond Guarantor relies on third parties.

The Covered Bond Guarantor has entered into agreements with a number of third parties, which have agreed to perform services for the Covered Bond Guarantor.  In particular, but without limitation:

(a)        the Servicer has been appointed to administer and service the Mortgage Loan Rights forming part of the Assets of the Trust and to provide certain other administration and management services to the Covered Bond Guarantor pursuant to the provisions of the Servicing Deed;

(b)        the Trust Manager has been appointed to provide the administration, cash management and calculation services set out in the Programme Documents including, operating the Trust Accounts prior to the service of a Notice to Pay on the Covered Bond Guarantor, keeping and maintaining records, preparing annual accounts of the Trust and arranging for those to be audited, directing the Covered Bond Guarantor to invest moneys standing to the credit of the GIC Account in Substitution Assets or Authorised Investments, performing all calculations on each Determination Date or other relevant date which are required to determine whether the Mortgage Loan Rights then forming part of the Assets of the Trust are in compliance with the Asset Coverage Test or the Amortisation Test, as applicable, and providing information to the Cover Pool Monitor;

(c)        the Cover Pool Monitor has been appointed to perform certain procedures and report on the accuracy of the Trust Manager's calculations in respect of the Asset Coverage Test or Amortisation Test, as the case may be, to assess whether the Trust Manager is keeping an accurate register of the Assets of the Trust and to perform certain procedures and report on compliance of the Assets forming part of the Trust with the requirements of the Australian Banking Act and the limits on investment in Substitution Assets in the Establishment Deed; and  

(d)        the Account Bank has been appointed to operate each of the Trust Accounts in accordance with the relevant Account Bank Mandate pursuant to the Account Bank Agreement.

In the event that any of those third parties fails to perform its obligations under the relevant Programme Documents to which it is a party, the realisable value of the Mortgage Loan Rights and other Assets forming part of the Trust or any part thereof or pending such realisation (if the Mortgage Loan Rights and other Assets forming part of the Trust or any part thereof cannot be sold) the ability of the Covered Bond Guarantor to make payments under the Covered Bond Guarantee may be affected.  For example, if the Servicer fails to adequately administer the Mortgage Loan Rights, this may lead to higher incidences of non-payment or default by Borrowers.

The Covered Bond Guarantor will also be reliant on the Swap Providers to provide it with the funds matching its obligations under the Intercompany Notes, the Demand Note and the Covered Bond Guarantee, as described below.

If the Trust Manager or the Covered Bond Guarantor has determined that, among other things, a Servicer Default has occurred and is continuing, then the Trust Manager or the Covered Bond Guarantor (as applicable) must, by written notice to the Servicer, immediately terminate the rights and obligations of the Servicer and appoint another appropriately qualified organisation to act in its place. The purported appointment of a Substitute Servicer following such termination has no effect until the Substitute Servicer executes an agreement under which it covenants to act as servicer in accordance with the Servicing Deed and all other Programme Documents to which the Servicer is a party. The Trust Manager must notify the Security Trustee, the Bond Trustee and the Rating Agencies of the identity of the Substitute Servicer. Until the appointment of the Substitute Servicer is complete, the Covered Bond Guarantor must act as Servicer, provided that the Trust Manager and the Covered Bond Guarantor (acting reasonably) have agreed a fee in writing to be paid to the Covered Bond Guarantor for the period during which the Covered Bond Guarantor is required to so act.  There can be no assurance that a Substitute Servicer with sufficient experience of administering mortgages of residential properties would be found who would be willing and able to service the Mortgage Loan Rights forming part of the Assets of the Trust on the terms of the Servicing Deed or that the Servicer will be able to continue to perform this role until such Substitute Servicer is appointed, particularly if the Servicer's termination is as a result of an Insolvency Event occurring in respect of the Servicer.

The ability of a Substitute Servicer or the Covered Bond Guarantor (when acting as Servicer) to perform fully the required services as Servicer would depend, among other things, on the information, software and records available at the time of the appointment or it being required to act as Servicer, respectively. Any delay or inability to appoint a substitute servicer may affect payments on the Mortgage Loan Rights forming part of the Assets of the Trust, the realisable value of such Mortgage Loan Rights and/or the ability of the Covered Bond Guarantor to make payments under the Covered Bond Guarantee.

The Servicer has no liability for any obligations of the Borrowers in respect of the Mortgage Loan Rights forming part of the Assets of the Trust. Covered Bondholders will have no right to consent to or approve of any actions taken by the Servicer under the Servicing Deed.

The Servicer is required to act as collecting agent for the Covered Bond Guarantor in respect of all payments in respect of the Mortgage Loan Rights forming part of the Assets of the Trust (including, without limitation, a Mortgage Loan Scheduled Payment).  If the Servicer receives, during a Collection Period, any money whatsoever arising from the Mortgage Loan Rights forming part of the Assets of the Trust which money belongs to the Covered Bond Guarantor, the Servicer will hold such money on trust for the Covered Bond Guarantor.  The Servicer is entitled to commingle such money with any other money held by it.  In the event of an insolvency of the Servicer, the ability of the Covered Bond Guarantor to trace and recover any such commingled money may be impaired. The risk of the Servicer not making such payments to the GIC Account, is mitigated by an obligation on the Servicer to transfer the collections into the GIC Account within two AU Business Days of receipt if the Servicer does not have (i) a short-term deposit rating of P-1 (by Moody's) and (ii) either a short-term credit rating of F1 (by Fitch) or a long term credit rating of at least A (by Fitch).

Neither the Security Trustee nor the Bond Trustee is obliged in any circumstances to act as a Servicer and none of the Covered Bond Guarantor, the Security Trustee or the Bond Trustee is obliged to monitor the performance by the Servicer of its obligations.

While a Trust Manager Default is subsisting and after the Covered Bond Guarantor becomes aware of the Trust Manager Default, the Covered Bond Guarantor may, upon giving written notice to the Servicer, the Trust Manager and the Rating Agencies, immediately terminate the rights and obligations of the Trust Manager under the Programme Documents and appoint another entity to act in its place. Until the appointment of the Substitute Trust Manager is complete, the Covered Bond Guarantor must act as Trust Manager, provided that the Issuer and the Covered Bond Guarantor (acting reasonably) have agreed a fee in writing to be paid to the Covered Bond Guarantor for the period during which the Covered Bond Guarantor is required to so act (and is entitled to the relevant fees for the period it so acts).  There can be no assurance that a Substitute Trust Manager would be found who would be willing and able to provide such trust management services on the terms of the Establishment Deed and the Management Agreement or that the Trust Manager will be able to continue to perform this role until such Substitute Trust Manager is appointed, particularly if the Trust Manager's termination is as a result of an Insolvency Event occurring in respect of the Trust Manager.  Neither the Security Trustee nor the Bond Trustee will be obliged in any circumstances to act as a Trust Manager or to monitor or supervise the performance by the Trust Manager (or any Substitute Trust Manager) of its obligations.

The ability of a Substitute Trust Manager or the Covered Bond Guarantor (when acting as Trust Manager) to perform fully the required trust management services as Trust Manager would depend, among other things, on the information, software and records available at the time of the appointment or it being required to act as Trust Manager, respectively. Any delay or inability to appoint a Substitute Trust Manager may affect payments to and from the Trust Accounts in accordance with the terms of the Programme Documents, and/or the provision of the Asset Coverage Reports and other information to, inter alia, the Rating Agencies, the Security Trustee and the Covered Bond Guarantor and may ultimately affect the ability of the Covered Bond Guarantor to make payments under the Covered Bond Guarantee.

The Trust Manager has no obligation itself to advance payments that Borrowers fail to make in a timely fashion. Covered Bondholders will have no right to consent to or approve of any actions taken by the Trust Manager under the Establishment Deed and/or the Management Agreement.

The Covered Bond Guarantor relies on Swap Providers.

In order to hedge certain interest rate, currency or other risks in respect of amounts received by the Covered Bond Guarantor under the Mortgage Loans and from certain other Assets forming part of the Trust, amounts payable by the Covered Bond Guarantor under the Intercompany Notes and the Demand Note and/or amounts payable by the Covered Bond Guarantor under the Covered Bond Guarantee to Covered Bondholders in respect of the Covered Bonds on issue, the Covered Bond Guarantor will enter into certain swap transactions with a number of swap providers (each, a Swap Provider).

If the Covered Bond Guarantor fails to make timely payments of amounts due under any Swap Agreement, then it will have defaulted under that Swap Agreement and such Swap Agreement may be terminated.  Further, a Swap Provider is only obliged to make payments to the Covered Bond Guarantor if the Covered Bond Guarantor complies with its payment obligations under the relevant Swap Agreement.  If a Swap Agreement (or one or more Swaps under such Swap Agreement) terminates or the relevant Swap Provider is not obliged to make payments or if it defaults in its obligations to make payments of amounts in the relevant currency equal to the full amount to be paid to the Covered Bond Guarantor on the payment date under such Swap Agreements, the Covered Bond Guarantor will be exposed to changes in the relevant currency exchange rates to Australian Dollars (where relevant) and to any changes in the relevant rates of interest.  Unless a replacement swap is entered into, the Covered Bond Guarantor may have insufficient funds to make payments under or in respect of the Intercompany Notes, the Demand Note or the Covered Bond Guarantee.

If a Swap Agreement (or one or more Swaps under such Swap Agreement) terminates, then the Covered Bond Guarantor may be obliged to make a termination payment to the relevant Swap Provider.  There can be no assurance that the Covered Bond Guarantor will have sufficient funds available to make a termination payment under the relevant Swap Agreement or to make any upfront payment required by a replacement swap counterparty, nor can there be any assurance that the Covered Bond Guarantor will be able to find a replacement swap counterparty which has both sufficiently high ratings as may be required by any of the Rating Agencies and which agrees to enter into a replacement swap agreement on similar commercial terms.

If the Covered Bond Guarantor is obliged to pay a termination payment under any Swap Agreement:

(i)         (if the Interest Rate Swap Provider is not the Issuer or, if the Interest Rate Swap Provider is the Issuer and a Regulatory Event has occurred or is likely to occur) and such termination payment in respect of the Interest Rate Swaps will rank ahead of amounts due on the Covered Bonds; and

(ii)        any such termination payment in respect of the Covered Bond Swaps, and (if the Interest Rate Swap Provider is the Issuer and a Regulatory Event has not occurred or is not likely to occur) any such termination payment in respect of the Interest Rate Swaps will rank pari passu and rateably with amounts due on the Covered Bonds,

except where default by, or downgrade of, the relevant Swap Provider has caused the relevant Swap Agreement to terminate.  The obligation to pay a termination payment may adversely affect the ability of the Covered Bond Guarantor to meet its obligations under the Covered Bond Guarantee (see further "Risk Factors - General Risk Factors - Enforceability of Priority of Excluded Swap Termination Proceeds").

There are differences in timings of obligations of the Covered Bond Guarantor and the Covered Bond Swap Providers under the Covered Bond Swaps that may affect the Covered Bond Guarantor's ability to make payments under the Covered Bond Guarantee.

With respect to the Covered Bond Swaps, it is expected that the Covered Bond Guarantor will pay a quarterly amount, on each relevant payment date, to each Covered Bond Swap Provider based on the Bank Bill Rate (or such other rate as may be specified in the relevant confirmation).  A Covered Bond Swap Provider may not be obliged to make corresponding swap payments to the Covered Bond Guarantor under a Covered Bond Swap for up to 12 months until amounts are due and payable by the Covered Bond Guarantor under the relevant Intercompany Note (prior to the service of a Notice to Pay or Covered Bond Guarantee Acceleration Notice on the Covered Bond Guarantor) or are Due for Payment under the Covered Bond Guarantee (after the service of a Notice to Pay or Covered Bond Guarantee Acceleration Notice on the Covered Bond Guarantor).  If a Covered Bond Swap Provider does not meet its payment obligations to the Covered Bond Guarantor under the relevant Covered Bond Swap and such Covered Bond Swap Provider does not make a termination payment that has become due from it to the Covered Bond Guarantor, the Covered Bond Guarantor may have a larger shortfall in funds with which to make payments under the Covered Bond Guarantee with respect to the Covered Bonds than if the Covered Bond Swap Provider's payment obligations coincided with the Covered Bond Guarantor's payment obligations under the Covered Bond Guarantee.  Hence, the difference in timing between the obligations of the Covered Bond Guarantor and the Covered Bond Swap Providers under the Covered Bond Swaps may affect the Covered Bond Guarantor's ability to make payments under the Covered Bond Guarantee with respect to the Covered Bonds.

Covered Bondholders receive a limited description of the Mortgage Loan Rights.

Covered Bondholders may not receive detailed statistics or information in relation to the Mortgage Loans Rights forming part of the Assets of the Trust because it is expected that the constitution of the Mortgage Loans Rights forming part of the Assets of the Trust will frequently change due to, for instance:

·          the Seller selling additional Mortgage Loan Rights to the Covered Bond Guarantor;

·          payments by the Borrowers on those Mortgage Loans; and

·          the Covered Bond Guarantor's interest in the Mortgage Loan Rights being transferred to, or surrendered in favour of, the Seller in accordance with the Mortgage Sale Agreement (see "Overview of the Principal Documents - The Mortgage Sale Agreement - Repurchase by the Seller following Breach of Representations and Warranties ").

There is no assurance that the characteristics of the Mortgage Loan Rights sold to the Covered Bond Guarantor on any Closing Date will be the same as those of the other Mortgage Loan Rights forming part of the Assets of the Trust as at the relevant Closing Date.  However, each Mortgage Loan sold to the Covered Bond Guarantor will be required to be an Eligible Mortgage Loan and the Seller will also be required to make the Representations and Warranties set out in the Mortgage Sale Agreement on such date - see "Overview of the Principal Documents - Mortgage Sale Agreement" (although the criteria for Eligible Mortgage Loans and Representations and Warranties may change in certain circumstances - see "The Bond Trustee and the Security Trustee may agree to modifications to the Programme Documents without, respectively the Covered Bondholders' or Secured Creditors' prior consent" above).  In addition, the Asset Coverage Test is intended to ensure that on each Determination Date the Adjusted Aggregate Mortgage Loan Amount (as at the last day of the immediately preceding Collection Period) is an amount at least equal to the Australian Dollar Equivalent of the aggregate Principal Amount Outstanding (as at the last day of the immediately preceding Collection Period) of the Covered Bonds for so long as Covered Bonds remain outstanding (prior to the Service of a Notice to Pay or, if earlier, a Covered Bond Guarantee Acceleration Notice on the Covered Bond Guarantor and the Issuer) and the Trust Manager will provide monthly reports that will set out certain information in relation to the Asset Coverage Test.

The credit and origination policies of the Seller may change and if any Mortgage Loans have been originated under revised policies and the Mortgage Loans are then sold to the Covered Bond Guarantor in accordance with and pursuant to the terms of the Mortgage Sale Agreement, the characteristics of the Mortgage Loan Rights forming part of the Assets of the Trust could change.  This could adversely affect the ability of the Covered Bond Guarantor to meet its obligations under the Covered Bond Guarantee.

Maintenance of the Mortgage Loan Rights.

The Asset Coverage Test may not be satisfied which may lead to an Issuer Event of Default.

The Asset Coverage Test is intended to test the asset coverage of the Assets of the Trust held from time to time by the Covered Bond Guarantor in respect of the Covered Bonds on a monthly basis (prior to the service of an Issuer Acceleration Notice and a Notice to Pay or, if earlier, a Covered Bond Guarantee Acceleration Notice on the Covered Bond Guarantor).  This is to ensure that the Assets of the Trust held from time to time by the Covered Bond Guarantor do not fall below a certain threshold and are sufficient for the Covered Bond Guarantor to meet its obligations under the Covered Bond Guarantee and senior expenses which rank in priority or pari passu and rateably with amounts due on the Covered Bonds.  (see "Overview of the Principal Documents - Establishment Deed - Asset Coverage Test" and "Overview of the Principal Documents - Mortgage Sale Agreement").

If the Asset Coverage Test is not satisfied on a Determination Date and also on the next following Determination Date, the Trust Manager will immediately notify the Covered Bond Guarantor, the Bond Trustee and the Security Trustee and the Bond Trustee must serve an Asset Coverage Test Breach Notice on the Covered Bond Guarantor (subject to the Bond Trustee having actual knowledge or express notice of the non-satisfaction of the Asset Coverage Test).  The Bond Trustee will be deemed to revoke an Asset Coverage Test Breach Notice if, on any Determination Date falling on or prior to the third Determination Date after the Asset Coverage Test was initially not satisfied, the Asset Coverage Test is subsequently satisfied and neither a Notice to Pay nor a Covered Bond Guarantee Acceleration Notice has been served.  If the Bond Trustee is deemed to revoke an Asset Coverage Test Breach Notice, the Trust Manager will immediately notify in writing the Bond Trustee of such revocation.  If the Asset Coverage Test Breach Notice is not revoked by the Bond Trustee as described above, an Issuer Event of Default will occur. The Bond Trustee will then be entitled to, and in certain circumstances required to, serve an Issuer Acceleration Notice on the Issuer. Following the service of an Issuer Acceleration Notice, the Bond Trustee will be required to serve a Notice to Pay on the Covered Bond Guarantor.

The Senior Demand Note Component ranks senior to payments on the Covered Bonds, provided that the Asset Coverage Test is met.

The Demand Noteholder is entitled to require repayment of any principal amount of the Demand Note at any time by notice in writing to the Covered Bond Guarantor (copied to the Trust Manager).  Any amount so demanded must be repaid on the Distribution Date falling immediately after the demand is made by the Demand Noteholder, provided that the Asset Coverage Test will continue to be satisfied after giving effect to such repayment and that no Asset Coverage Test Breach Notice has been given on or prior to such day which has not been revoked.

Repayment of the Demand Note in those circumstances will be made in accordance with the applicable Priority of Payments.  In the Pre-Issuer Event of Default Principal Priority of Payments, the Guarantee Priority of Payments and the Post-Enforcement Priority of Payments, repayment of the Demand Note in respect of the Senior Demand Note Component (such that the Asset Coverage Test continues to be met after such repayment) ranks senior to the amounts due and payable by the Covered Bond Guarantor to the Covered Bondholders and Couponholders under the Covered Bond Guarantee and to the Intercompany Noteholder under the Intercompany Notes.  However, the amounts so due and payable in respect of the Senior Demand Note Component must only be satisfied by in specie distribution of the Mortgage Loan Rights to the Demand Noteholder.  This means that the Covered Bondholders and Couponholders will not have the benefit of any voluntary over-collateralisation. This may adversely affect the ability of the Covered Bond Guarantor to meet its obligations under the Covered Bond Guarantee.

Failure to comply with the Asset Coverage Test or Amortisation Test may result in the acceleration of the obligations of the Issuer and the Covered Bond Guarantor.

The Amortisation Test is intended to ensure that, following service of an Issuer Acceleration Notice and a Notice to Pay (but prior to service of a Covered Bond Guarantee Acceleration Notice), the Assets of the Trust held from time to time by the Covered Bond Guarantor do not fall below a certain threshold to ensure that the Assets of the Trust held from time to time by the Covered Bond Guarantor are sufficient to meet its obligations under the Covered Bond Guarantee and senior expenses which rank in priority or pari passu and rateably with amounts due on the Covered Bonds (see "Overview of the Principal Documents - Establishment Deed - Amortisation Test").

If the aggregate collateral value of the Mortgage Loan Rights forming part of the Assets of the Trust has not been maintained in accordance with the terms of the Asset Coverage Test or the Amortisation Test, then that may affect the realisable value of the Mortgage Loan Rights forming part of the Assets of the Trust (both before and after the occurrence of a Covered Bond Guarantor Event of Default) and/or the ability of the Covered Bond Guarantor to make payments under the Covered Bond Guarantee. 

Failure to satisfy the Amortisation Test on any Determination Date following an Issuer Event of Default that is continuing will result in the Bond Trustee serving an Amortisation Test Breach Notice on the Issuer and the Covered Bond Guarantor and immediately upon the service of such notice, the Conversion Event Date will occur. Upon the occurrence of the Conversion Event Date, all Series of Covered Bonds will become Pass-Through Covered Bonds and accordingly, payment of the unpaid amount in respect of all Series of Covered Bonds by the Covered Bond Guarantor under the Covered Bond Guarantee will be deferred until the Extended Due for Payment Date.

None of the Covered Bond Guarantor, the Security Trustee or the Bond Trustee will be responsible for monitoring compliance with, nor the monitoring of, the Asset Coverage Test or the Amortisation Test or any other test.

There is no guarantee or assurances that the Covered Bond Guarantor will be able to sell Selected Mortgage Loan Rights following service of an Asset Coverage Test Breach Notice or a Notice to Pay at the times required or for an amount equal to or in excess of the Adjusted Required Redemption Amount.

Following the service of an Asset Coverage Test Breach Notice on the Covered Bond Guarantor or the occurrence of an Issuer Event of Default and service of a Notice to Pay on the Covered Bond Guarantor, the Trust Manager must direct the Covered Bond Guarantor to sell Selected Mortgage Loan Rights (selected on a basis that is representative of the Mortgage Loan Rights then forming part of the Assets of the Trust).  The proceeds from any such sale must be deposited into the GIC Account and applied in accordance with the applicable Priority of Payments (see "Overview of the Principal Documents - Establishment Deed - Sale of Selected Mortgage Loan Rights following service of an Asset Coverage Test Breach Notice" and "Overview of the Principal Documents - Establishment Deed - Sale of Selected Mortgage Loan Rights following service of a Notice to Pay").

There is no guarantee the Covered Bond Guarantor will, where the Covered Bond Guarantor is obliged to sell Selected Mortgage Loan Rights, find a buyer to buy Selected Mortgage Loan Rights at the times required and there can be no guarantee or assurance as to the price which may be able to be obtained, which may affect payments under the Covered Bond Guarantee.  The Covered Bond Guarantor will offer the Selected Mortgage Loan Rights for the best price reasonably available but, in any event, following the service of an Asset Coverage Test Breach Notice (but prior to an Issuer Event of Default and service of a Notice to Pay on the Covered Bond Guarantor) the Selected Mortgage Loan Rights may not be sold by the Covered Bond Guarantor for an amount less than the Current Principal Balance of the Mortgage Loans relating to the Mortgage Loan Rights plus the arrears of interest and accrued interest thereon.  Following an Issuer Event of Default and service of a Notice to Pay on the Covered Bond Guarantor, the Selected Mortgage Loan Rights may not be sold by the Covered Bond Guarantor for an amount less than the Adjusted Required Redemption Amount for the relevant Series of Pass-Through Covered Bonds.  The Trust Manager may only direct the Covered Bond Guarantor to proceed with any sale of Selected Mortgage Loan Rights in accordance with the above and subsequent redemption of any Covered Bonds if such sale and subsequent redemption will not result in an Amortisation Test Deterioration.

At any time after service of a Notice to Pay on the Covered Bond Guarantor (but prior to service of a Covered Bond Guarantee Acceleration Notice on the Covered Bond Guarantor and the Issuer), on each Distribution Date the Covered Bond Guarantor will apply the Available Income Amount and the Available Principal Amount to redeem or repay in part the relevant Series of Covered Bonds, to the extent (a) such Series of Covered Bonds are either Pass-Through Covered Bonds or are due and payable and; (b) that the Covered Bond Guarantor has sufficient moneys available to make such payments in accordance with the Guarantee Priority of Payments.  The Available Principal Amount will include the sale proceeds of Selected Mortgage Loan Rights (including any excess sale proceeds resulting from the sale of Selected Mortgage Loan Rights sold in respect of another Series of Covered Bonds) and all principal repayments received on the Mortgage Loan Rights forming part of the Assets of the Trust generally.  Prior to the occurrence of the Conversion Event Date, this may adversely affect later maturing Series of Covered Bonds.

For the purposes hereof:

Adjusted Required Redemption Amount means in relation to a Series of Covered Bonds:

(a)        the Australian Dollar Equivalent of the Required Redemption Amount; plus or minus

(b)        the Australian Dollar Equivalent of any swap termination amounts payable under the Covered Bond Swaps corresponding to the Series to or by the Covered Bond Guarantor less (where applicable) amounts standing to the credit of (i) the GIC Account; and (ii) the principal balance of any Substitution Assets and Authorised Investments (excluding all amounts to be applied on the next following Distribution Date to repay higher ranking amounts in the relevant Priority of Payments and those amounts that are required to repay any Series of Covered Bonds which mature prior to or on the same date as the relevant Series of Covered Bonds); plus or minus

(c)        the Australian Dollar Equivalent of any swap termination amounts payable to or by the Covered Bond Guarantor under any Interest Rate Swap.

Realisation of Charged Property may not be sufficient to repay all Secured Creditors following a Covered Bond Guarantor Event of Default.

If a Covered Bond Guarantor Event of Default occurs and entitles the Security Trustee to enforce the Security created under and pursuant to the Security Deed, the proceeds from the realisation of the Charged Property will be applied by the Security Trustee towards payment of all secured obligations in accordance with the Post-Enforcement Priority of Payments described in "Cashflows" below.

There is no guarantee that the proceeds of realisation of the Charged Property will be in an amount sufficient to repay all amounts due to the Secured Creditors (including the Covered Bondholders) under the Covered Bonds and the Programme Documents.

If a Covered Bond Guarantee Acceleration Notice is served on the Covered Bond Guarantor and the Issuer then the Covered Bonds may be repaid sooner or later than expected or not at all.

A number of factors may affect the realisable value of the Mortgage Loan Rights or the ability of the Covered Bond Guarantor to make payments under the Covered Bond Guarantee.

Following the occurrence of an Issuer Event of Default that is continuing, the service on the Issuer and the Covered Bond Guarantor of an Issuer Acceleration Notice and the service on the Covered Bond Guarantor (copied to the Trust Manager) of a Notice to Pay, the realisable value of Mortgage Loan Rights forming part of the Assets of the Trust may be reduced (which may affect the ability of the Covered Bond Guarantor to make payments under the Covered Bond Guarantee) by:

·          representations or warranties not being given by the Covered Bond Guarantor or (unless otherwise agreed with the Seller) the Seller;

·          default by Borrowers of amounts due on their Mortgage Loans;

·          changes to the Seller's credit and origination policies;

·          the Covered Bond Guarantor not having legal title to the Mortgage Loan Rights forming part of the Assets of the Trust;

·          risks in relation to some types of Mortgage Loans which may adversely affect the value of Mortgage Loan Rights forming part of the Assets of the Trusts;

·          limited recourse to the Seller;

·          the state of the Australian economy and/or residential mortgage market (which may impact potential buyers);

·          possible regulatory changes by ASIC in Australia and other regulatory authorities;

·          regulations in Australia that could lead to some terms of the Mortgage Loans being unenforceable; and

·          other issues which impact on the enforceability of the Mortgage Loans.

Some of these factors are considered in more detail below.  However, it should be noted that the Asset Coverage Test, the Amortisation Test and the criteria for Eligible Mortgage Loans are intended to ensure that there will be an adequate amount of Mortgage Loans forming part of the Assets of the Trust and moneys standing to the credit of the GIC Account to enable the Covered Bond Guarantor to repay the Covered Bonds following the service of an Issuer Acceleration Notice on the Issuer and service of a Notice to Pay on the Covered Bond Guarantor and accordingly it is expected (but there is no assurance) that Selected Mortgage Loan Rights could be realised for sufficient values to enable the Covered Bond Guarantor to meet its obligations under the Covered Bond Guarantee. In addition, any sale of Selected Mortgage Loan Rights and subsequent redemption of any Covered Bonds by the Covered Bond Guarantor following the service of an Asset Coverage Test Breach Notice on the Covered Bond Guarantor or an Issuer Event of Default and the service of a Notice to Pay on the Covered Bond Guarantor, can only proceed if such sale and subsequent redemption does not result in an Amortisation Test Deterioration.

No representations or warranties will be given by the Covered Bond Guarantor or the Seller if Selected Mortgage Loan Rights are to be sold.

Following the occurrence of an Issuer Event of Default, service on the Issuer and the Covered Bond Guarantor of an Issuer Acceleration Notice and service on the Covered Bond Guarantor (copied to the Trust Manager) of a Notice to Pay (but prior to the service of a Covered Bond Guarantee Acceleration Notice), the Covered Bond Guarantor will be obliged to sell Selected Mortgage Loan Rights to third party purchasers, subject to the rights of repurchase enjoyed by the Seller pursuant to the terms of the Mortgage Sale Agreement (see "Overview of the Principal Documents - Mortgage Sale Agreement - Seller's right of repurchase in respect of Selected Mortgage Loan Rights").  In respect of any sale of Selected Mortgage Loan Rights to third parties, however, neither the Covered Bond Guarantor nor the Seller will be permitted to give representations, warranties or indemnities in respect of those Selected Mortgage Loan Rights (unless expressly permitted to do so by the Security Trustee and otherwise agreed with the Seller).  There is no assurance that the Seller would give any warranties or representations in respect of the Selected Mortgage Loan Rights originated by it and sold to the Covered Bond Guarantor.  Any Representations or Warranties previously given by the Seller in respect of the Mortgage Loans forming part of the Assets of the Trust may not have value for a third party purchaser if the Seller is then insolvent.  Accordingly, there is a risk that the realisable value of the Selected Mortgage Loan Rights could be adversely affected by the lack of representations and warranties which in turn could adversely affect the ability of the Covered Bond Guarantor to meet its obligations under the Covered Bond Guarantee.

A deterioration in the Australian housing market could adversely affect the ability of the Covered Bond Guarantor to make payments under the Covered Bond Guarantee.

The Issuer's business includes mortgage lending in Australia with loans secured against residential property.  Any deterioration in the quality of the Mortgage Loan Rights forming part of the Assets of the Trust could have an adverse effect on the Covered Bond Guarantor's ability to make payment under the Covered Bond Guarantee. There can be no assurance that the housing market will not deteriorate. An increase in household indebtedness, a decline in house prices or an increase in interest rates could have an adverse effect on the Australian mortgage market, which could be exacerbated by different types of mortgages in the market, such as interest-only loans.

The current Australian economic environment may affect the rate at which the Seller originates new Mortgage Loans and may also affect the level of attrition of the Seller's existing Borrowers, which could in turn adversely affect the ability of the Covered Bond Guarantor to make payments under the Covered Bond Guarantee. There has not been any severe deterioration in the Australian mortgage market as a whole in recent years.

Regional economic declines may adversely affect the ability of the Covered Bond Guarantor to make payments under the Covered Bond Guarantee.

To the extent that specific geographic regions have experienced or may experience in the future weaker regional economic conditions and housing markets than other regions, a concentration of the Mortgage Loans in such a region may be expected to exacerbate all of the risks relating to the Mortgage Loans described in this section.  The Covered Bond Guarantor can predict neither when nor where such regional economic declines may occur nor to what extent or for how long such conditions may continue but if the timing and payment of the Mortgage Loans forming part of the Assets of the Trust is adversely affected as described above, the ability of the Covered Bond Guarantor to make payments under the Covered Bond Guarantee could be reduced or delayed.

Default by Borrowers in paying amounts due on their Mortgage Loans could affect the ability of the Covered Bond Guarantor to make payments under the Covered Bond Guarantee.

Borrowers may default on their obligations due under the Mortgage Loans.  Defaults may occur for a variety of reasons.  The Mortgage Loans are affected by credit, liquidity and interest rate risks.  Various factors influence mortgage delinquency rates, prepayment rates, repossession frequency and the ultimate payment of interest and principal on the Mortgage Loans.  These factors include changes in the national, regional or international economic climate such as: volatility in interest rates; lack of liquidity in wholesale funding markets in periods of stressed economic conditions, economic or political crisis; illiquidity and downward price pressure; commencement of recession and employment fluctuations; the availability of financing; consumer perception as to the continuing availability of credit and price competition which may have an adverse impact on delinquency and repossession rates; inflation; yields on alternative investments; and political developments and government policies, including changes in tax laws.  Given that the majority of Mortgage Loans have a variable rate of interest, most Mortgage Loans are sensitive to changes in monetary policy and interest rates.  Other factors in Borrowers' individual, personal or financial circumstances may also affect the ability of Borrowers to repay the Mortgage Loans.  Loss of earnings, illness, divorce and other similar factors may lead to an increase in delinquencies by, and bankruptcies of, Borrowers and could ultimately have an adverse impact on the ability of Borrowers to repay the Mortgage Loans.

The rate of prepayments on Mortgage Loans may be increased due to Borrowers refinancing their Mortgage Loans and sales of any property charged by a Mortgage (either voluntarily by Borrowers or as a result of enforcement action taken), as well as the receipt of proceeds from buildings insurance and life assurance policies.  The rate of prepayment of Mortgage Loans may also be influenced by the presence or absence of early repayment charges.

In addition, the ability of a Borrower to sell a property charged by a Mortgage which secures a Mortgage Loan at a price sufficient to repay the amounts outstanding under that Mortgage Loan will depend upon a number of factors, including the availability of buyers for that property, the value of that property and property values and the property market in general at the time of such proposed sale.  The downturn in the Australian economy has had and could continue to have a negative effect on the housing market.

Further, the mortgage loan market in Australia is highly competitive.  This competitive environment may affect the rate at which the Seller originates new Mortgage Loans and may also affect the repayment rate of existing Mortgage Loans.

If the timing and payment of the Mortgage Loans is adversely affected by any of the risks described above, the ability of the Covered Bond Guarantor to make payments under the Covered Bond Guarantee could be reduced or delayed.

The Current Principal Balance of any Defaulted Mortgage Loans forming part of the Assets of the Trust will be given no value for the purposes of any calculation of the Asset Coverage Test and the Amortisation Test.

Enforcement of Mortgage Loans can involve substantial costs and delays and may not permit full recovery by the Servicer

In order to enforce the Mortgage Loans in certain situations, such as Defaulted Mortgage Loans, a court order or other judicial or administrative proceedings may be needed in order to establish the Borrower's obligation to pay and to enable a sale by executive measures. Such proceedings may involve substantial legal costs and delays before the Servicer is able to enforce such Defaulted Mortgage Loan and any related Mortgage Loan Rights. Such proceedings may face a variety of impediments, including, but not limited to: (i) regulatory and judicial policies and procedures designed to protect borrowers' rights, (ii) judicial or administrative proceedings instigated by borrowers, other creditors or other third parties, (iii) changes in applicable law that may affect the enforceability or amount recoverable in respect of Mortgage Loans and (iv) equitable judicial powers that could delay or halt judicial enforcement proceedings. Even if a sale is successfully completed, the value recovered from a Defaulted Mortgage Loan will also depend upon the prevailing market conditions. Pursuant to the Servicing Deed, the Servicer is not required to pursue such enforcement if it has reasonable grounds to believe that the expenses of such litigation may outweigh the proceeds from such litigation.

The value of the Mortgage Loan Rights may decline, which may result in losses to the Covered Bondholders.

The guarantee granted by Covered Bond Guarantor in respect of the Covered Bonds, will, inter alia, be backed by the Covered Bond Guarantor's interest in the Mortgage Loan Rights forming part of the Assets of the Trust (through its right of indemnity from the Assets of the Trust).  Since the economic value of the Mortgage Loan Rights forming part of the Assets of the Trust may increase or decrease, the value of the Trust's Assets may decrease (for example if there is a general decline in property values).  Neither the Issuer nor the Covered Bond Guarantor makes any representation, warranty or guarantee that the value of a Mortgaged Property will remain at the same level as it was on the date of the origination of the related Mortgage Loan or at any other time.  The value of the Mortgage Loan Rights forming part of the Assets of the Trust may be significantly reduced by the overall decline in property values experienced by the residential property market in Australia and may also be further reduced by any additional decline in such property values.  This, ultimately, may result in losses to the Covered Bondholders if such security is required to be enforced.

The Seller's credit and origination policies may be revised from time to time, which may affect the ability of the Covered Bond Guarantor to make payments under the Covered Bond Guarantee.

Each of the Mortgage Loans forming part of the Assets of the Trust originated by the Seller will have been originated in accordance with the Seller's credit and origination policies applicable at the time of origination.  The Seller's credit and origination policies consider a variety of factors such as a potential Borrower's credit history, employment history and status and repayment ability, as well as the value of the Mortgaged Property to be mortgaged.  The Seller retains the right to revise its credit and origination policies from time to time.

If any new Mortgage Loans which have been originated under revised credit and origination policies are then sold to the Covered Bond Guarantor pursuant to the terms of the Mortgage Sale Agreement, notwithstanding that such Mortgage Loans would need to be Eligible Mortgage Loans and the subject of Representations and Warranties given in the Mortgage Sale Agreement by the Seller, the characteristics of the Mortgage Loans forming part of the Assets of the Trust could at such time change.  This could lead to a delay or reduction in the payments received by the Covered Bondholders under the Covered Bond Guarantee.

The Servicer may initiate certain changes to the Mortgage Documents, which could impact the rates of principal repayment on the Mortgage Loans.

Most frequently, the Servicer will change the interest rate applying to a Mortgage Loan.  In addition, subject to certain conditions, the Servicer may from time to time offer additional features and/or products with respect to the Mortgage Loans.

As a result of such changes, the characteristics of the Mortgage Loans may differ from the characteristics of the Mortgage Loans at any other time.  If the Servicer elects to change certain features of the Mortgage Loans, this could result in different rates of principal repayment on the Mortgage Loans than initially anticipated.

The Seller will initially retain legal title to the Mortgage Loan Rights, which may affect the ability of the Covered Bond Guarantor to make payments under the Covered Bond Guarantee.

The Seller will initially retain legal title to the Mortgage Loan Rights and custody of the Mortgage Documents in respect of such Mortgage Loan Rights. The Covered Bond Guarantor will initially hold only equitable title to the Mortgage Loan Rights forming part of the Assets of the Trust as the Borrower in respect of the relevant Mortgage Loan will not be notified of the assignment of that Mortgage Loan Rights in respect of that Mortgage Loan to the Covered Bond Guarantor. This is different to holding legal title which would require that the Covered Bond Guarantor not only has possession of the mortgage title documents, but also that transfers of Mortgages to the Covered Bond Guarantor be filed with the land title offices in the appropriate Australian jurisdictions and that notice of such assignment be given to the Borrower. The Covered Bond Guarantor will take certain steps to protect its interest in, and title to, the Mortgage Loan Rights forming part of the Assets of the Trust if and only in the limited circumstances described in "Overview of the Principal Documents - Mortgage Sale Agreement -Transfer of Title to the Mortgage Loan Rights to the Covered Bond Guarantor" and until such right arises the Covered Bond Guarantor will not give notice of the sale of the Mortgage Loan Rights to any Borrower or register or record its interest in the Mortgages at any land title offices or take any other steps to perfect its title to the Mortgages.

At any time during which the Covered Bond Guarantor does not hold legal title to the Mortgage Loan Rights forming part of the Assets of the Trust, the following risks exist:

(a)        first, if the Seller wrongly sells Mortgage Loan Rights to another person when such Mortgage Loan Rights have already been sold to the Covered Bond Guarantor, that other person would acquire an interest in such Mortgage Loan Rights either:

(i)         free of any interest of the Covered Bond Guarantor, if that acquisition was made for value and any security interest held by the Covered Bond Guarantor in relation to the Mortgage Loan Rights was not perfected for the purposes of the PPSA at the time of acquisition; or

(ii)        ranking in priority to the Covered Bond Guarantor's interest, if that person acquires a perfected security interest in the Mortgage Loan Rights where the Covered Bond Guarantor's interest was not perfected for the purposes of the PPSA at the time that person's security interest was perfected.

However, the risk of third party claims obtaining priority to the interests of the Covered Bond Guarantor would be likely to be limited to circumstances arising from a breach by the Seller of its contractual obligations or fraud, negligence or mistake on the part of the Seller or the Covered Bond Guarantor or their respective personnel or agents. Additionally, for the purpose of protecting the Covered Bond Guarantor's interests and security interests in the Mortgage Loan Right, the Trust Manager has agreed to do all things reasonably necessary to permit any security interest held by the Covered Bond Guarantor in relation to the Mortgage Loan Rights to be perfected by registration on the PPSR. However, if such registration is not completed or is completed incorrectly, the Covered Bond Guarantor's security interest in relation to Mortgage Loan Rights may not be perfected and a third party may be able to take an interest in such Mortgage Loan Rights free of any interest held by the Covered Bond Guarantor or take a security interest which ranks in priority to any security interest of the Covered Bond Guarantor;

(b)        second, until notice of the transfer to the Covered Bond Guarantor has been provided to the relevant Borrowers, the rights of the Covered Bond Guarantor may be subject to the rights of the Borrowers against the Seller, as applicable, such as rights of set-off, which occur in relation to transactions made between Borrowers and the Seller, and the rights of Borrowers to redeem their Mortgages by repaying the Mortgage Loans directly to the Seller. In addition, section 80(7) of the PPSA provides that an obligor in relation to a receivable will be entitled to make payments to, and obtain a good discharge from, the seller of the receivable rather than directly to, and from, the purchaser of the receivable until such time as the obligor receives a notice of the assignment of the relevant receivable that complies with the requirements of section 80(7)(a) of the PPSA (including a statement that payment is to be made to the purchaser of the receivable). If, however, an obligor receives a notice that complies with the requirements of section 80(7)(a) of the PPSA from any person other than the seller of the receivable, the obligor requests the purchaser of the receivable to provide proof of the assignment and the purchaser of the receivable fails to provide that proof within 5 business days of the request, the obligor may continue to make payments to the seller. Accordingly, after a Perfection of Title Event has occurred and legal title to the Mortgage Loan Rights has been transferred to the Covered Bond Guarantor, a Borrower in relation to any Mortgage Loan may in certain circumstances nevertheless make payments to the Seller and obtain a good discharge from the Seller notwithstanding the legal assignment of the relevant Mortgage Loan Rights to the Covered Bond Guarantor, if the Covered Bond Guarantor fails to comply with these notice requirements. However, this risk is mitigated by the fact that the Seller has provided the Covered Bond Guarantor with powers of attorney to permit it to give notice of such an assignment of the Mortgage Loan Rights to the relevant Borrower in the name of the Seller; and

(c)        third, unless the Covered Bond Guarantor, or the Trust Manager, has perfected the Covered Bond Guarantor's title to the Mortgage Loan Rights (which it is only entitled to do in certain limited circumstances), the Covered Bond Guarantor would not be able to enforce any Borrower's obligations under any Mortgage Loan Rights itself but would have to join the Seller as a party to any legal proceedings.

If the risks described in paragraphs (a), (b) or (c) above were to occur, then the realisable value of the Mortgage Loan Rights forming part of the Assets of the Trust and/or the ability of the Covered Bond Guarantor to make payments under the Covered Bond Guarantee may be affected.

There is limited recourse to the Seller in respect of a breach of Representation and Warranty.

The Covered Bond Guarantor, the Bond Trustee and the Security Trustee will not undertake any investigations, searches or other actions in respect of any Mortgage Loan Rights and will rely instead on the Representations and Warranties given in the Mortgage Sale Agreement by the Seller in respect of the Mortgage Loans sold by the Seller to the Covered Bond Guarantor.

In the event of a material breach of any of the Representations and Warranties made by the Seller or if any of the Representations and Warranties proves to be materially untrue, in each case in respect of any Mortgage Loan Rights forming part of the Assets of the Trust as at the date at which these are given (having regard in determining materiality to, among other things, whether a loss is likely to be incurred in respect of the Mortgage Loan to which the breach relates after taking into account the likelihood of recoverability or otherwise of any sums under any applicable Insurance Policies), then following notice being given by the Trust Manager or the Seller to the Covered Bond Guarantor or the Covered Bond Guarantor giving notice to the Seller, if the breach is not remedied to the Covered Bond Guarantor's satisfaction within five AU Business Days of the Seller or the Trust Manager giving or receiving the notice, the Seller will be required to pay the Covered Bond Guarantor an amount equal to the sum of the Current Principal Balance of the relevant Mortgage Loan and arrears of interest and accrued interest, following which the Covered Bond Guarantor will treat the Mortgage Loan as having been paid in full and will hold the relevant Mortgage Loan Rights as trustee of the BOQ Trust.

There can be no assurance that the Seller, in the future, will have the financial resources to repurchase Mortgage Loan Rights from the Covered Bond Guarantor.  However, if the Seller does not repurchase those Mortgage Loan Rights which are in material breach of the Representations and Warranties, then the LVR Adjusted Mortgage Loan Balance Amount or the Asset Percentage Adjusted Mortgage Loan Balance Amount of those Mortgage Loans (as applicable) will be deducted from the calculation of the Adjusted Aggregate Mortgage Loan Amount in the calculation of the Asset Coverage Test (except for any Defaulted Mortgage Loans, which for the purposes of calculating the LVR Adjusted Mortgage Loan Balance Amount and the Asset Percentage Adjusted Mortgage Loan Balance Amount, as the case may be, are given a zero value). There is no further recourse to the Seller in respect of a material breach of a Representation or Warranty.  The sole remedy is as described above.

RISK FACTORS RELATED TO THE COVERED BONDS

Risks related to the structure of a particular issue of Covered Bonds

A range of Covered Bonds may be issued under the Programme.  A number of these Covered Bonds may have features which contain particular risks for potential investors.  Set out below is a description of the material known risks of the most common such features.

Further issue of Covered Bonds under the Programme may adversely affect the existing Covered Bondholders.

Save in respect of the first issue of Covered Bonds issued under the Programme, Covered Bonds issued under the Programme will either be fungible with an existing Series of Covered Bonds (in which case they will form part of such Series) or have different terms from an existing Series of Covered Bonds (in which case they will constitute a new Series).

All Covered Bonds issued from time to time will rank pari passu with each other in all respects (save as set out in the Guarantee Priority of Payments) and will share in the security granted by the Covered Bond Guarantor under the Security Deed.  Prior to the occurrence of a Covered Bond Guarantor Event of Default, if an Issuer Event of Default occurs in respect of a particular Series of Covered Bonds then, following the service of an Issuer Acceleration Notice on the Issuer (copied to the Covered Bond Guarantor) and service of a Notice to Pay on the Covered Bond Guarantor, the Covered Bonds of all Series then outstanding will accelerate at the same time as against the Issuer but will be subject to, and have the benefit of, payments made by the Covered Bond Guarantor under the Covered Bond Guarantee.  If a Covered Bond Guarantor Event of Default occurs in respect of a particular Series of Covered Bonds, then following the service of a Covered Bond Guarantee Acceleration Notice, the Covered Bonds of all Series outstanding will accelerate as against the Issuer (if not already accelerated following the occurrence of an Issuer Event of Default and the service on the Issuer and the Covered Bond Guarantor of an Issuer Acceleration Notice) and the obligations of the Covered Bond Guarantor under the Covered Bond Guarantee will accelerate.

In order to help ensure that any further issue of Covered Bonds under the Programme does not adversely affect the existing Covered Bondholders:

·          the Issuer (as Intercompany Note Subscriber) will be obliged to subscribe for an Intercompany Note issued by the Covered Bond Guarantor in an amount equal to either (i) the Principal Amount Outstanding of such further issue of Covered Bonds; or (ii) the Australian Dollar Equivalent of the nominal value of such further issue of Covered Bonds, and for a matching term.  The Covered Bond Guarantor will use the proceeds of such issue (if not denominated in Australian Dollars, upon exchange into Australian Dollars under the applicable Non-Forward Starting Covered Bond Swap) only: (i) to fund (in whole or in part) the Consideration for Mortgage Loan Rights purchased from the Seller in accordance with the terms of the Mortgage Sale Agreement; and/or (ii) to invest in Substitution Assets in an amount not exceeding the prescribed limits (as specified in the Establishment Deed) to the extent required to meet the Asset Coverage Test and thereafter the Covered Bond Guarantor may use such proceeds (subject to compliance with the Asset Coverage Test) only:

(a)        to make a repayment of the Demand Note in respect of the Senior Demand Note Component provided that the Trust Manager has determined that the Asset Coverage Test will continue to be met after giving effect to such repayment; and/or

(b)        if an existing Series or Tranche, or part of an existing Series or Tranche, of Covered Bonds is being refinanced (by the issue of a further Series or Tranche of Covered Bonds to which the Intercompany Note relates), to repay the Intercompany Note(s) corresponding to the Covered Bonds being so refinanced (after exchange into the currency of the Intercompany Note being repaid (if necessary)); and/or

(c)        to make a deposit of all or part of the proceeds in the GIC Account (including to fund the Reserve Fund up to an amount equal to the Reserve Fund Required Amount); and

·          the Asset Coverage Test will be required to be met both before and immediately after any further issue of Covered Bonds.

The Seller will, subject to the satisfaction of certain conditions (including the criteria for Eligible Mortgage Loans), be permitted to sell further Mortgage Loan Rights to the Covered Bond Guarantor from time to time.

Covered Bonds are subject to Optional Redemption by the Issuer, which may limit their market value.

If an Issuer Call is specified in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement), the Issuer may elect to redeem all or some of the Covered Bonds at the Optional Redemption Amount (specified in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement)) plus accrued interest.  An optional redemption feature of Covered Bonds is likely to limit the market value of such Covered Bonds.  During any period when the Issuer may elect to redeem Covered Bonds, the market value of those Covered Bonds generally will not rise substantially above the price at which they can be redeemed.  This also may be true prior to any redemption period.

The Issuer may be expected to redeem Covered Bonds when its cost of borrowing is lower than the interest rate on the Covered Bonds.  At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Covered Bonds being redeemed and may only be able to do so at a significantly lower rate.  Potential investors should consider reinvestment risk in light of other investments that are likely to be available at that time.

The value of Fixed Rate Covered Bonds may be adversely affected by movements in market interest rates.

Investment in Fixed Rate Covered Bonds involves the risk that if market interest rates subsequently increase above the rate paid on Fixed Rate Covered bonds, this will adversely affect the value of the Fixed Rate Covered Bonds.

If a Covered Bond is issued without the benefit of tax gross-up, its returns and market value may be affected.

The Issuer may issue Covered Bonds without any obligation to gross-up the relevant Covered Bondholders or Couponholders in the event it is required to make a withholding or deduction in respect of a payment made by it in relation to the Covered Bonds by any law or regulation or the administrative practice of any jurisdiction.  This may affect the return of relevant Covered Bondholders or Couponholders in respect of the Covered Bonds and may affect the market value of those Covered Bonds.

Withdrawal or downgrading of the initial ratings of the Covered Bonds, the issuance of unsolicited ratings on the Covered Bonds, or unfavourable regulatory actions with respect to Moody's or Fitch may adversely affect the value of the Covered Bonds.

It is a condition to the issuance of the Covered Bonds that the Covered Bonds receive appropriate credit ratings from Fitch and Moody's.  A credit rating is not a recommendation to purchase, hold or sell the Covered Bonds, inasmuch as such credit rating does not address the market price or the suitability for a particular investor of a security.  The credit rating of the Covered Bonds addresses the likelihood of the repayment of principal and the payment of interest on the Covered Bonds pursuant to their terms but does not address the timing of distributions of principal on the Covered Bonds prior to their Final Maturity Date, or their Extended Due Date for Payment.  There is no assurance that a Covered Bond will remain outstanding for any given period of time or that a credit rating will not be lowered or withdrawn entirely by a Rating Agency, if in its judgment circumstances in the future so warrant.  Any action taken by a Rating Agency to lower or withdraw the credit rating on a Covered Bond could adversely affect the value of that Covered Bond on resale.  In addition, if a Rating Agency issues a credit rating lower than the solicited credit rating, changes its credit rating or withdraws its credit rating, no one has any obligation to provide additional credit enhancement or to restore the original credit rating.  Investors should make their own evaluation of an investment in the Covered Bonds and not rely solely on the credit ratings assigned to the Covered Bonds.  See "Credit ratings assigned to the Covered Bonds may change and may not reflect all risks associated with an investment in the Covered Bonds" below.

Credit ratings assigned to the Covered Bonds may change and may not reflect all risks associated with an investment in the Covered Bonds.

The credit ratings assigned to a Series of Covered Bonds to be issued under the Programme by Fitch address the probability of default and of the recovery given a default of the Covered Bonds, the likelihood of full and timely payment to holders of Covered Bonds of all payments of interest on each Interest Payment Date and the likelihood of timely payment of principal in relation to the Covered Bonds.  The credit rating assigned to the Covered Bonds by Moody's address the probability of default, the loss given by default and the expected loss posed to potential investors.

The expected ratings of a Series of the Covered Bonds will be set out in the Applicable Final Terms for such Series of Covered Bonds (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement).  In addition, the Final Terms or Pricing Supplement, as the case may be, will specify which Rating Agencies are giving a credit rating to the relevant Series of Covered Bonds.  The relevant Series of Covered Bonds may be rated by one or more Rating Agencies as set out therein.  Any Rating Agency may lower its rating or withdraw its rating if, in the sole judgment of the Rating Agency, the credit quality of the Covered Bonds has declined or is in question. 

In the event that a rating assigned to the Covered Bonds or the Issuer is subsequently lowered or withdrawn or qualified for any reason, no person or entity is obliged to provide any additional support or credit enhancement with respect to the Covered Bonds, the Issuer may be adversely affected, the market value of the Covered Bonds is likely to be adversely affected and the ability of the Issuer to make payment under the Covered Bonds may be adversely affected.

In addition, at any time any Rating Agency may revise its relevant rating methodology with the result that, amongst other things, any rating assigned to the Covered Bonds may be lowered. If any rating assigned to the Covered Bonds is lowered or withdrawn, the market value of the Covered Bonds may reduce.

Rating agencies other than the Rating Agencies could seek to rate the Covered Bonds and if such unsolicited ratings are lower than the comparable ratings assigned to the Covered Bonds by a Rating Agency, those unsolicited ratings could have an adverse effect on the value of the Covered Bonds. For the avoidance of doubt and unless the context otherwise requires, any reference to "ratings" or "rating" in this Prospectus is to the ratings assigned by a Rating Agency only.

A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time (including as a result of changes to rating methodologies).  A credit rating may not reflect the potential impact of all of the risks related to the structure, market, additional factors discussed above and other factors that may affect the value of the Covered Bonds.  A downgrade in the rating of the Issuer or the sovereign rating of Australia may have a negative impact on the credit ratings of the Covered Bonds.

In general, European regulated investors are restricted under the CRA Regulation from using credit ratings for regulatory purposes in the EEA, unless such ratings are issued by a credit rating agency established in the EEA and registered under the CRA Regulation (and such registration has not been withdrawn or suspended), subject to transitional provisions that apply in certain circumstances whilst the registration application is pending. Such general restriction will also apply in the case of credit ratings issued by third country non-EEA credit rating agencies, unless the relevant credit ratings are endorsed by an EEA-registered credit rating agency or the relevant third country rating agency is certified in accordance with the CRA Regulation (and such endorsement action or certification, as the case may be, has not been withdrawn or suspended). The list of registered and certified rating agencies published by ESMA on its website in accordance with the CRA Regulation is not conclusive evidence of the status of the relevant rating agency included in such list, as there may be delays between certain supervisory measures being taken against a relevant rating agency and the publication of the updated ESMA list.

Investors regulated in the UK are subject to similar restrictions under the UK CRA Regulation. As such, UK regulated investors are required to use for UK regulatory purposes ratings issued by a credit rating agency established in the UK and registered under the UK CRA Regulation. In the case of ratings issued by third country non-UK credit rating agencies, third country credit ratings can either be: (a) endorsed by a UK registered credit rating agency; or (b) issued by a third country credit rating agency that is certified in accordance with the UK CRA Regulation. Note this is subject, in each case, to (a) the relevant UK registration, certification or endorsement, as the case may be, not having been withdrawn or suspended, and (b) transitional provisions that apply in certain circumstances.

If the status of the rating agency rating the Covered Bonds changes for the purposes of the CRA Regulation or the UK CRA Regulation, relevant regulated investors may no longer be able to use the rating for regulatory purposes in the EEA or the UK, as applicable, and the Covered Bonds may have a different regulatory treatment, which may impact the value of the Covered Bonds and their liquidity in the secondary market.

Neither of the Rating Agencies is established in the European Union or UK, and neither of the Rating Agencies has applied for registration under the CRA Regulation or UK CRA Regulation. However their credit ratings with respect to certain Series or Tranches of Covered Bonds have been endorsed. The rating by Moody's has been endorsed by Moody's Deutschland GmbH and the rating by Fitch has been endorsed by Fitch Ratings Ireland Limited, each in accordance with the CRA Regulation, and have not been withdrawn. Moody's Deutschland GmbH and Fitch Ratings Ireland Limited are established in the EU and registered under the CRA Regulation. The rating by Moody's has been endorsed by Moody's Investors Service Ltd and the rating by Fitch has been endorsed by Fitch Ratings Limited, in each case in accordance with the UK CRA Regulation and have not been withdrawn.  References in this Prospectus to Moody's and/or Fitch shall be construed accordingly. There can be no assurance that the endorsement of the credit ratings in the EU or the UK of Moody's and Fitch will continue.

The ratings assigned to a Series or Tranche of Covered Bonds to be issued under the Programme will be specified in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement). Whether or not each credit rating applied for in relation to a Series or Tranche of Covered Bonds will be issued by a credit rating agency established in the European Union and registered under the CRA Regulation, or in the UK and registered under the UK CRA Regulation, will be disclosed in the Applicable Final Terms.

A Rating Agency may be removed as a rating agency on the Programme unless the requisite number of Covered Bondholders object to such removal.

There is no assurance that both Rating Agencies will rate the Covered Bonds up to their relevant Final Maturity Date. Covered Bondholders should note that pursuant to Condition 14, the Bond Trustee and the Security Trustee are required to concur in and effect any modifications required to any of the Programme Documents to accommodate the removal of any one of the Rating Agencies from the Programme or the addition of any Rating Agency, provided that:

(a)        at all times, there are at least two rating agencies rating the Programme and any Covered Bonds then outstanding; and

(b)        in respect of the removal of any one of the Rating Agencies from the Programme only:

(i)         the Issuer has provided at least 30 calendar days' notice to the Covered Bondholders of the proposed modification effecting the removal in the manner provided in Condition 13 and by publication on Bloomberg on the "Company News" screen relating to the Covered Bonds; and

(ii)        Covered Bondholders holding, in aggregate, at least 10 per cent. of the Principal Amount Outstanding of the Covered Bonds of all Series then outstanding (with the Covered Bonds of all Series taken together as a single Series and, if the nominal amount of the Covered Bonds is not denominated in Australian Dollars, converted into Australian Dollars at the relevant Swap Rate) have not notified the Bond Trustee in writing (or otherwise in accordance with the then current practice of any relevant Clearing System through which such Covered Bonds may be held) within the notification period referred to in paragraph (b)(i) above that such Covered Bondholders do not consent to the proposed modification effecting the removal.

If Covered Bondholders holding, in aggregate, at least 10 per cent. of the Principal Amount Outstanding of the Covered Bonds of all Series then outstanding (with the Covered Bonds of all Series taken together as a single Series and, if the nominal amount of the Covered Bonds is not denominated in Australian Dollars, converted into Australian Dollars at the relevant Swap Rate) have notified the Bond Trustee in writing (or otherwise in accordance with the then current practice of any relevant Clearing System through which such Covered Bonds may be held) within the notification period referred to in paragraph (b)(i) above that they do not consent to the proposed modification effecting the removal (an Objected Modification), then such Objected Modification will not be made unless the Bond Trustee is (a) so directed by an Extraordinary Resolution of the Covered Bondholders of the relevant one or more Series with the Covered Bonds of all such Series taken together as a single Series (and, if applicable, converted into Australian Dollars at the relevant Swap Rate) or (b) requested to do so in writing by Covered Bondholders holding not less than 25 per cent. of the Principal Amount Outstanding of the Covered Bonds of the relevant one or more Series (with the Covered Bonds of all such Series taken together as a single Series and, if applicable, converted into Australian Dollars at the relevant Swap Rate) then outstanding and at all times then only if the Bond Trustee is first indemnified and/or secured and/or prefunded to its satisfaction against all Liabilities to which it may thereby render itself liable or which it may incur by so doing.

Objections made in writing other than through the relevant Clearing System must be accompanied by evidence to the Bond Trustee's satisfaction (having regard to prevailing market practices) of the relevant Covered Bondholder's holding of the Covered Bonds.

A Rating Affirmation Notice may not address certain matters that may be of relevance to Covered Bondholders.

Each Series or Tranche of Covered Bonds to be issued under the Programme will, unless otherwise specified in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement), be rated "Aaa" by Moody's and "AAA" by Fitch.  A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning Rating Agency. There is no obligation on the Issuer to maintain the credit ratings in respect of any Series of Covered Bonds.

The terms of certain of the Programme Documents provide that, if certain events or circumstances occur, the Issuer must deliver a notice in writing to the Covered Bond Guarantor (and copied to the Trust Manager and each Rating Agency) confirming that it has notified each Rating Agency of the event or circumstances and that the Issuer is satisfied, for the purposes of the Programme Documents, following discussions with each Rating Agency, that the event or circumstances, as applicable, will not result in a reduction, qualification or withdrawal of the ratings then assigned by such Rating Agency (a Rating Affirmation Notice). Any Rating Affirmation Notice, if given, will be given on the basis of the facts and circumstances prevailing at the relevant time, and in the context of cumulative changes to the transaction of which the securities form part since the issuance closing date. A Rating Affirmation Notice is given on the basis that it will not be construed as advice for the benefit of any parties to the transaction. If a Rating Agency confirmation is required for the purposes of the Programme Documents and the Rating Agency does not consider such confirmation necessary, does not respond to a written request for a discussion by the Issuer or does not provide a confirmation in writing in connection with a Rating Affirmation Notice to be given by the Issuer in respect of any event or circumstance, the Issuer will be entitled to assume that the then current rating of the Covered Bonds from that Rating Agency will not be downgraded, qualified or withdrawn by such Rating Agency as a result of such event or circumstance. However, such non-response or co-operation will not be interpreted to mean that such Rating Agency has given any deemed confirmation or affirmation of rating or other response in respect of such action or step.  It should be noted that, depending on the timing of delivery of the request and any information needed to be provided as part of any such request, it may be the case that a Rating Agency cannot provide a confirmation, affirmation or response in the time available or at all, and the Rating Agency will not be responsible for the consequences thereof.  Such confirmation, affirmation or response if given, will be given on the basis of the facts and circumstances prevailing at the relevant time, and in the context of cumulative changes to the transaction of which the securities form part since the issuance closing date.

By acquiring the Covered Bonds, investors will be deemed to have acknowledged and agreed that, notwithstanding the foregoing, a credit rating is an assessment of credit and does not address other matters that may be of relevance to Covered Bondholders including, without limitation, in the case of discussions undertaken by a Rating Agency in the context of a Rating Affirmation Notice to be issued by the Issuer, whether any action proposed to be taken by the Issuer, the Covered Bond Guarantor, the Seller, the Servicer, the Trust Manager, the Bond Trustee, the Security Trustee or any other party to a Programme Document is either (i) permitted by the terms of the relevant Programme Document, or (ii) in the best interests of, or not materially prejudicial to, some or all of the Covered Bondholders.  The fact that the Rating Agencies have not advised that the then current ratings of the Covered Bonds would not be adversely affected or withdrawn does not impose or extend any actual or contingent liability on a Rating Agency to the Issuer, the Covered Bond Guarantor, the Bond Trustee, the Security Trustee, the Secured Creditors (including the Covered Bondholders) or any other person or create any legal relations between the Rating Agencies and the Issuer, the Covered Bond Guarantor, the Bond Trustee, the Security Trustee, the Secured Creditors (including the Covered Bondholders) or any other person whether by way of contract or otherwise.

Covered Bonds that are not in physical form are subject to certain risks.

Unless the Bearer Global Covered Bonds or the Registered Global Covered Bonds are exchanged for Bearer Definitive Covered Bonds or Registered Definitive Covered Bonds, respectively, which exchange will only occur in the limited circumstances set out under "Form of the Covered Bonds - Bearer Covered Bonds" and "Form of the Covered Bonds - Registered Covered Bonds" below, the beneficial ownership of the Covered Bonds will be recorded in book-entry form only with Euroclear and Clearstream, Luxembourg or, in the case of A$ Registered Covered Bonds, the Austraclear System.  The fact that the Covered Bonds are not represented in physical form could, among other things:

·          result in payment delays on the Covered Bonds because distributions on the Covered Bonds will be sent by or on behalf of the Issuer to Euroclear, Clearstream, Luxembourg or the Austraclear System instead of directly to Covered Bondholders;

·          make it difficult for Covered Bondholders to pledge the Covered Bonds as security if Covered Bonds in physical form are required or necessary for such purposes; and

·          hinder the ability of Covered Bondholders to resell the Covered Bonds because some investors may be unwilling to buy Covered Bonds that are not in physical form.

Holders of Covered Bonds issued in the form of Global Covered Bonds and deposited with a common depositary for Euroclear and Clearstream, Luxembourg and/or an alternative clearing system will have to rely on their procedures, including for transfer, payment and communications.

Covered Bonds (other than A$ Registered Covered Bonds) issued under the Programme will be represented on issue by one or more global Covered Bonds that may be deposited with a common depositary for Euroclear and Clearstream, Luxembourg (each as defined under "Terms and Conditions of the Covered Bonds"). Except in the circumstances described in each global Covered Bond, investors will not be entitled to receive Covered Bonds in definitive form. Each of Euroclear and Clearstream, Luxembourg and their respective direct and indirect participants will maintain records of the beneficial interests in each global Covered Bond held through it. While the Covered Bonds are represented by a global Covered Bond, investors will be able to trade their beneficial interests only through the relevant clearing systems and their respective participants, and investors will have to rely on the procedures of the relevant clearing system and of their respective participants, including for transfer, payment and communications.

While the Covered Bonds are represented by global Covered Bonds, the Issuer will discharge its payment obligations under the Covered Bonds by making payments through the relevant clearing systems. A holder of a beneficial interest in a global Covered Bond must rely on the procedures of the relevant clearing system and its participants to receive payments under the Covered Bonds. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in any global Covered Bond.

A Covered Bondholder who holds less than the minimum Specified Denomination may not receive a definitive Covered Bond in respect of such holding, making such denomination illiquid and difficult to trade.

In relation to any issue of Covered Bonds that have denominations consisting of a minimum Specified Denomination plus one or more higher integral multiples of another smaller amount, it is possible that such Covered Bonds may be traded in amounts in excess of the minimum Specified Denomination that are not integral multiples of such minimum Specified Denomination.  In such a case, a Covered Bondholder who, as a result of trading such amounts, holds an amount which (after deducting integral multiples of such minimum Specified Denomination) is less than the minimum Specified Denomination in his account with the relevant clearing system at the relevant time may not receive a definitive Covered Bond in respect of such holding (should definitive Covered Bonds be printed) and would need to purchase a principal amount of Covered Bonds such that its holding amounts to a Specified Denomination.  If definitive Covered Bonds are issued, Covered Bondholders should be aware that definitive Covered Bonds that have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade.

There are restrictions on the transfer of the Covered Bonds.

The Covered Bonds and the Covered Bond Guarantee have not been and will not be registered under the Securities Act or under any securities laws of any state or other jurisdiction of the United States and may not be offered or sold in the United States or to, or for the account or the benefit of, U.S. persons as defined in Regulation S unless an exemption from the registration requirements of the Securities Act is available and in accordance with all applicable securities laws of any state of the United States and any other jurisdiction. No sale, assignment, participation, pledge or transfer of a Covered Bond or any interest therein may be made unless made in compliance with the transfer and selling restrictions set forth under "Subscription and Sale and Transfer and Selling Restrictions" below.

The regulation and reform of benchmarks may adversely affect the value of Covered Bonds linked to or referencing such "benchmarks". 

 

Interest rates and indices which are deemed to be benchmarks (including, amongst others, SONIA, EURIBOR, BBSW Rate and BKBM, each as defined below) are the subject of recent national and international regulatory guidance and proposals for reform. Some of these reforms are already effective whilst others are still to be implemented. These reforms may cause such benchmarks to perform differently than in the past, to disappear entirely, or have other consequences which cannot be predicted. Any such consequence could have a material adverse effect on any Covered Bonds linked to or referencing such a "benchmark". 

In Australia, examples of reforms that are already effective include changes to the methodology for calculation of the BBSW Rate, and amendments to the Corporations Act made by the Treasury Laws Amendment (2017 Measures No. 5) Act 2018 of Australia which, among other things, enable ASIC to make rules relating to the generation and administration of financial benchmarks.  On 6 June 2018, ASIC designated the BBSW Rate as a "significant financial benchmark" and made the ASIC Financial Benchmark (Administration) Rules 2018 and the ASIC Financial Benchmarks (Compelled) Rules 2018. On 27 June 2019, ASIC granted ASX Benchmarks Pty Limited a licence to administer the BBSW Rate from 1 July 2019.

Further, the RBA has amended its criteria for repo eligibility to include a requirement that floating rate bonds and marketed asset-backed securities issued on or after 1 December 2022 that reference the BBSW Rate must contain at least one "robust" and "reasonable and fair" fallback rate for the BBSW Rate in the event that it permanently ceases to exist, if such securities are to be accepted by the RBA as being eligible collateral for the purposes of any repurchase agreements to be entered into with the RBA. In November 2022, the Australian Financial Markets Association published proposed drafting for the BBSW Rate fallback provisions (the AFMA Proposal). The fallback provisions relating to the BBSW Rate included in Condition 4(b)(ii)(A)(II) for the Covered Bonds are based on the AFMA Proposal (the BBSW Rate Fallback Provisions).

 

The BBSW Rate Fallback Provisions for the Covered Bonds distinguish between temporary and permanent triggers affecting the BBSW Rate.

 

If a Temporary Disruption Trigger occurs in respect of the BBSW Rate, the interest rate for any day on which that Temporary Disruption Trigger is continuing will be the interest rate determined in accordance with the Temporary Disruption Fallback which provides that, in the first instance, preference will be given to the Administrator Recommended Rate (which is a rate formally recommended for use as the replacement for the BBSW Rate by the Administrator). The second preference will be given to the Supervisor Recommended Rate (which is a rate formally recommended for use as the replacement for the BBSW Rate by the Supervisor). Finally, preference will be given to the Final Fallback Rate.

 

In the event that a Permanent Discontinuation Trigger occurs in respect of the BBSW Rate, the rate for any Interest Determination Date which occurs on or following the applicable Permanent Fallback Effective Date will be the Fallback Rate which is determined in accordance with the Permanent Discontinuation Fallback and which may be AONIA.

 

Investors should be aware that whilst the BBSW Rate is based on a forward-looking basis and on observed bid and offer rates for Australian prime bank eligible securities (which rates may incorporate a premium for credit risk), AONIA is an overnight, risk free cash rate and will be applied to calculate interest by compounding observed rates in arrears and the application of a spread adjustment.  There can be no assurance that AONIA as described above will produce the economic equivalent of the BBSW Rate.

 

In New Zealand, the current regulatory regime for the New Zealand Bank Bill Benchmark Rate (BKBM) has been judged as not sufficient to meet the EU equivalence standard under the Benchmarks Regulation. Without regulatory reform, the use of BKBM will be restricted in the EU from 1 January 2020. To address this, the Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Act 2019 was enacted on 30 August 2019 which introduced a licensing regime for administrators of financial benchmarks. Regulations setting out further detail of licence obligations came into force on 15 March 2021.

The EU Benchmarks Regulation applies, subject to certain transitional provisions, to the provision of benchmarks, the contribution of input data to a benchmark and the use of a benchmark within the EU. Among other things, it (i) requires benchmark administrators to be authorised or registered (or, if non-EU-based, to be subject to an equivalent regime or otherwise recognised or endorsed) and (ii) prevents certain uses by EU supervised entities of benchmarks of administrators that are not authorised or registered (or, if non-EU based, not deemed equivalent or recognised or endorsed). Regulation (EU) 2016/1011 as it forms part of domestic law by virtue of the EUWA) among other things, applies to the provision of benchmarks and the use of a benchmark in the UK. Similarly, it prohibits the use in the UK by UK supervised entities of benchmarks of administrators that are not authorised by the FCA or registered on the FCA register (or, if non-UK based, not deemed equivalent or recognised or endorsed).

 

The EU Benchmarks Regulation and/or the UK Benchmarks Regulation, as applicable, could have a material impact on any Covered Bonds linked to or referencing a benchmark in particular, if the methodology or other terms of the benchmark are changed in order to comply with the requirements of the EU Benchmarks Regulation and/or the UK Benchmarks Regulation, as applicable. It is also not possible to predict whether such reforms will lead to any such benchmarks (including the BBSW Rate) not being supported going forward.  Such changes could, among other things, have the effect of reducing, increasing or otherwise affecting the volatility of the published rate or level of the relevant benchmark.

 

More broadly, any of the international or national reforms, or the general increased regulatory scrutiny of "benchmarks", could increase the costs and risks of administering or otherwise participating in the setting of a "benchmark" and complying with any such regulations or requirements.

 

Separately, the euro risk free-rate working group for the euro area has published a set of guiding principles and high level recommendations for fallback provisions in,  amongst other things, new euro denominated cash products (including bonds) referencing EURIBOR.  The guiding principles indicate, amongst other things, that continuing to reference EURIBOR in relevant contracts (without robust fallback provisions) may increase the risk to the euro area financial system. On 11 May 2021, the euro risk-free rate working group published its recommendations on EURIBOR fallback trigger events and fallback rates.

 

Such factors may have (without limitation) the following effects on certain benchmarks: (i) discouraging market participants from continuing to administer or contribute to a benchmark; (ii) triggering changes in the rules or methodologies used in the benchmark and/or (iii) leading to the disappearance of the benchmark.  Any of the above changes or any other consequential changes as a result of international or national reforms or other initiatives or investigations, could have a material adverse effect on the value of and return on any Covered Bonds linked to, referencing, or otherwise dependent (in whole or in part) upon, a benchmark. In addition, if the benchmarks are discontinued there can be no assurance that the applicable fall-back provisions under the Swap Agreements would operate to allow the transactions under the Swap Agreements to effectively mitigate interest rate risk in respect of the Covered Bonds. It should also be noted that broadly divergent interest rate calculation methodologies may develop and apply as between the Covered Bonds and/or the Swap Agreements due to applicable fall-back provisions or other matters. The consequences of this are uncertain but could include a reduction in the amounts available to the Issuer to meet its payment obligations in respect of the Covered Bonds.

Investors should be aware that in the case of certain Floating Rate Covered Bonds, the Conditions of the Covered Bonds provide for certain fallback arrangements in the event that a published benchmark, including an inter-bank offered rate (such as EURIBOR) or another relevant reference rate (such as the BBSW Rate) ceases to exist or be published. In certain circumstances the ultimate fallback for the purposes of calculation of interest for a particular Interest Period may result in the Rate of Interest for the last preceding Interest Period being used. This may result in the effective application of a fixed rate for Floating Rate Covered Bonds based on the rate which was last observed on the Relevant Screen Page or the initial Rate of Interest applicable to such Covered Bonds on the Interest Commencement Date.

Any such consequences could have a material adverse effect on the value or liquidity of and return on any such Covered Bonds. Moreover, any of the above matters or any other significant change to the setting or existence of any relevant rate could affect the ability of the Issuer to meet its obligations under the Floating Rate Covered Bonds or could have a material adverse effect on the value or liquidity of, and the amount payable under, such Floating Rate Covered Bonds.

Investors should consult their own independent advisers and make their own assessment about the potential risks imposed by the EU Benchmarks Regulation and/or the UK Benchmarks Regulation, as applicable, or any of the international or national reforms, including in relation to the risks associated with the potential discontinuation of the BBSW Rate and the application of the BBSW Rate Fallback Provisions,  in making any investment decision with respect to any Covered Bonds linked to or referencing a benchmark.

The market continues to develop in relation to SONIA as a reference rate.

Where the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement) for a Series of Floating Rate Covered Bonds identifies that the Rate of Interest for such Covered Bonds will be determined by reference to SONIA, the Rate of Interest will be determined on the basis of Compounded Daily SONIA (as defined in the Conditions of the Covered Bonds). Compounded Daily SONIA differs from LIBOR in a number of material respects, including (without limitation) that Compounded Daily SONIA is a backwards-looking, compounded, risk-free overnight rate, whereas LIBOR is expressed on the basis of a forward-looking term and includes a risk-element based on inter-bank lending. As such, investors should be aware that LIBOR and SONIA may behave materially differently as interest reference rates for Covered Bonds issued under the Programme. The use of Compounded Daily SONIA as a reference rate for bonds is nascent, and is subject to change and development, both in terms of the substance of the calculation and in the development and adoption of market infrastructure for the issuance and trading of debt securities referencing Compounded Daily SONIA.

Accordingly, prospective investors in any Covered Bonds referencing Compounded Daily SONIA should be aware that the market continues to develop in relation to SONIA as a reference rate in the capital markets and its adoption as an alternative to Sterling LIBOR. For example, in the context of backwards-looking SONIA rates, market participants and relevant working groups have, as at the date of this Prospectus, explored different methodologies, such as daily compounding rates and weighted average rates, and forward-looking 'term' SONIA reference rates (which seek to measure the market's forward expectation of an average SONIA rate over a designated term) have also been or are being, developed. The adoption of SONIA may also see component inputs into swap rates or other composite rates transferring from LIBOR or another reference rate to SONIA.

The market or a significant part thereof may adopt an application of SONIA that differs significantly from that set out in the Conditions as applicable to Covered Bonds referencing Compounded Daily SONIA that are issued under this Prospectus. In addition, the methodology for determining any overnight rate index by reference to which the Rate of Interest in respect of certain Covered Bonds may be calculated could change during the life of any Covered Bonds. Furthermore, the Issuer may in future issue Covered Bonds referencing SONIA that differ materially in terms of interest determination when compared with any previous SONIA-referenced Covered Bonds issued by it under the Programme. The nascent development of Compounded Daily SONIA as an interest reference rate for the Eurobond markets, as well as continued development of SONIA-based rates for such market and the market infrastructure for adopting such rates, could result in reduced liquidity or increased volatility or could otherwise affect the market price of any SONIA-referenced Covered Bonds issued under the Programme from time to time.

Furthermore, the Rate of Interest on Covered Bonds which reference Compounded Daily SONIA is only capable of being determined at the end of the relevant Observation Period and immediately prior to the relevant Interest Payment Date. It may be difficult for investors in Covered Bonds which reference Compounded Daily SONIA to estimate reliably the amount of interest which will be payable on such Covered Bonds, and some investors may be unable or unwilling to trade such Covered Bonds without changes to their IT systems, both of which factors could adversely impact the liquidity of such Covered Bonds. Further, in contrast to LIBOR-based Covered Bonds, if Covered Bonds referencing Compounded Daily SONIA become due and payable as a result of an Event of Default under Condition 9, or are otherwise redeemed early on a date which is not an Interest Payment Date, the final Rate of Interest payable in respect of such Covered Bonds shall only be determined immediately prior to the date on which the Covered Bonds become due and payable.

In addition, the manner of adoption or application of SONIA reference rates in one market may differ materially compared with the application and adoption of SONIA in other markets, such as the derivatives and loan markets. Investors should carefully consider how any mismatch between the adoption of SONIA reference rates across these markets may impact any hedging or other financial arrangements which they may put in place in connection with any acquisition, holding or disposal of Covered Bonds referencing Compounded Daily SONIA. If the market adopts a different calculation method, that would likely adversely affect the market value of such SONIA- referenced Covered Bonds.

Investors should carefully consider these matters when making their investment decision with respect to any such Covered Bonds.

Covered Bondholders' ability to enforce certain rights in connection with the Covered Bonds may be limited or affected by reforms to Australian insolvency legislation relating to "ipso facto" rights.

On 18 September 2017, the Treasury Laws Amendment (2017 Enterprise Incentives No.2) Act 2017 (the Treasury Act) received Royal Assent and was enacted.  The Treasury Act contains reforms to Australian insolvency laws. Under the Treasury Act, any right under a contract, agreement or arrangement (such as a right entitling a creditor to terminate a contract or to accelerate a payment under a contract) arising merely because a company, among other circumstances, is under administration, has appointed a managing controller or is the subject of an application under section 411 of the Corporations Act (i.e. ipso facto rights), will not be enforceable during a prescribed moratorium period.

The Treasury Act took effect on 1 July 2018 and applies to ipso facto rights arising under contracts, agreements or arrangements entered into at or after that date, subject to certain exclusions. On 21 June 2018, the Australian Government introduced the Corporations Amendment (Stay on Enforcing Certain Rights) Regulations 2018 (the Regulations) which sets out the types of contracts that will be excluded from the operation of the stay on the enforcement of ipso facto rights.

The Regulations provide that a contract, agreement or arrangement that is, or governs securities, financial products, bonds or promissory notes will be exempt from the moratorium. Furthermore, a contract, agreement or arrangement under which a party is or may be liable to subscribe for, or to procure subscribers for, securities, financial products, bonds or promissory notes is also excluded from the stay. However, since their commencement, the Treasury Act and the Regulations have not been the subject of judicial interpretation. If the Regulations are determined not to exclude the Covered Bonds from their operation under the exclusions mentioned above or any other exclusion under the Regulations, this may render unenforceable in Australia provisions of the Covered Bonds conditioned solely on the occurrence of events giving rise to ipso facto rights.

GENERAL RISK FACTORS

Risks related to the Covered Bonds generally

Set out below is a brief description of certain risks relating to the Covered Bonds generally:

It may be necessary for a Covered Bondholder to bring a suit in the courts of England or New South Wales, Australia (as applicable) to enforce its rights against the Issuer or the Covered Bond Guarantor.

The Issuer and the Covered Bond Guarantor have agreed to submit to the exclusive jurisdiction of the courts of England in any action arising out of the Bond Trust Deed, the Principal Agency Agreement, the Programme Agreement, and the Covered Bonds (but, in each case, excluding the A$ Registered Covered Bonds) and the non-exclusive jurisdiction of the courts of New South Wales, Australia in any action arising out of the documents governed by Australian law.  In the limited instances where a Covered Bondholder or Couponholder may proceed directly against the Issuer or Covered Bond Guarantor due to a failure to act by the Bond Trustee or the Security Trustee, as the case may be, as described herein, it may be necessary for such Covered Bondholder or Couponholder to bring a suit in the courts of England or New South Wales, Australia (as applicable) to enforce its rights against the Issuer or the Covered Bond Guarantor, as the case may be, with respect to the Bond Trust Deed or any other Programme Document (excluding the Programme Documents to the extent that they refer only to the A$ Registered Covered Bonds), the Covered Bonds (but excluding the A$ Registered Covered Bonds), the Coupons or the Security.

There is currently no active and liquid secondary market for the Covered Bonds, which may adversely impact their liquidity.

There is not, at present, an active and liquid secondary market for the Covered Bonds, and there can be no assurance that a secondary market for the Covered Bonds will develop. The Covered Bonds are subject to certain restrictions on the resale and other transfer thereof as set forth under "Subscription and Sale and Transfer and Selling Restrictions". If a secondary market does develop, it may not continue for the life of the Covered Bonds or it may not provide Covered Bondholders with liquidity of investment with the result that a Covered Bondholder may not be able to find a buyer to buy its Covered Bonds readily or at prices that will enable the Covered Bondholder to realise a desired yield.  Consequently, a Covered Bondholder must be able to bear the economic risk of an investment in a Covered Bond for an indefinite period of time.

The Security Trustee's powers may affect the interests of the Covered Bondholders.

Except where expressly provided otherwise in the Security Deed, the Security Trustee may exercise, or refrain from exercising, all of its rights, powers, authorities, discretions and remedies under the Security Deed and the other Programme Documents, and may form opinions, and give consents, approvals and waivers under the Security Deed and the other Programme Documents, in accordance with the direction or instructions of (for so long as there are any Covered Bonds outstanding) the Bond Trustee (acting pursuant to and in accordance with the terms of the Bond Trust Deed) or (where no Covered Bonds are outstanding) the Majority Secured Creditors.  If there is at any time a conflict between a duty owed by the Security Trustee to the Covered Bondholders and a duty owed by the Security Trustee to any other Secured Creditor or class of Secured Creditor, then the Security Trustee must have regard only to the interests of the Covered Bondholders while any of the Covered Bonds remain outstanding and will not be required to have regard to the interests of any other Secured Creditor or any other person, or to act upon or comply with any direction or request of any other Secured Creditor or any other person, while any amount remains owing to any Covered Bondholders.

Where the Security Trustee is required to have regard to the Covered Bondholders (or any Series thereof), it must have regard to the general interests of the Covered Bondholders (or any Series thereof) as a class and will not have regard to any interests arising from circumstances particular to individual Covered Bondholders or Couponholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular country, territory or any political subdivision thereof and the Security Trustee will not be entitled to require, nor will any Covered Bondholder or Couponholder be entitled to claim from, the Issuer, the Covered Bond Guarantor, the Bond Trustee, the Security Trustee or any other person any indemnification or payment in respect of any tax consequences of any such exercise upon individual Covered Bondholders or Couponholders, except to the extent already provided for in Condition 7.

If, in connection with the exercise of its powers, trusts, authorities or discretions, the Security Trustee is of the opinion that the interests of the holders of the Covered Bonds of any one or more Series could or would be materially prejudiced thereby, the Security Trustee may determine that it will not exercise such power, trust, authority or discretion without the approval of such Covered Bondholders by Extraordinary Resolution or by a direction in writing of such Covered Bondholders of not less than 25 per cent. of the Australian Dollar Equivalent of the Principal Amount Outstanding of the Covered Bonds of the relevant Series then outstanding, and which has not been contradicted by a direction in writing of such Covered Bondholders of an equal or greater Australian Dollar Equivalent received by the Security Trustee prior to exercise thereof.

Provided that the Security Trustee acts in good faith, as described in the foregoing, it will not incur any liability to any Secured Creditor or any other person for so doing.

The Bond Trustee and the Security Trustee may agree to modifications to the Programme Documents without, respectively, the Covered Bondholders' or other Secured Creditors' prior consent.

Pursuant to and subject to the terms of the Security Deed, the Security Trustee may, without the consent or sanction of any of the Covered Bondholders of any Series, the related Couponholders and without the consent or sanction of the other Secured Creditors (other than any Secured Creditor who is a party to the relevant document) at any time and from time to time concur with the Issuer and the Covered Bond Guarantor (acting at the direction of the Trust Manager) and any other party in making any modification to the Covered Bonds of one or more Series, the related Coupons or to the Security Deed or the other Programme Documents if: (a) so directed by the Bond Trustee (if there are Covered Bonds outstanding) or the Majority Secured Creditors (if there are no Covered Bonds outstanding); or (b) the modification is: (1) of a formal, minor or technical nature; (2) made to correct a manifest or proven error or an error established as such to the satisfaction of the Security Trustee; or (3) made to ensure compliance with mandatory provisions of law; and, in each case, the Bond Trustee (if any Covered Bonds are outstanding) has approved of the modification.

The Bond Trustee may, without the consent or sanction of any of the Covered Bondholders of any Series, the related Couponholders and without the consent or sanction of any other Secured Creditors (other than any Secured Creditor who is a party to the relevant document) at any time and from time to time concur with, and/or direct the Security Trustee to concur with the Issuer, and the Covered Bond Guarantor (acting at the direction of the Trust Manager) and any other party in making: (a) any modification to the Covered Bonds of one or more Series, the related Coupons or to any Programme Document which does not relate to a Series Reserved Matter and which in the opinion of the Bond Trustee is not materially prejudicial to the interests of the Covered Bondholders of any Series; or (b) any modification to the Covered Bonds of one or more Series, the related Coupons or any Programme Document which is, in the opinion of the Bond Trustee, of a formal, minor or technical nature or is, in the opinion of the Bond Trustee, made to correct a manifest error or comply with mandatory provisions of law (and for these purposes the Bond Trustee may disregard whether any such modification relates to a Series Reserved Matter); or (c) any modification referred to in the following paragraph.  In forming its opinion as to whether the Covered Bonds or any one or more Series, the related Coupons or any Programme Document is subject to a manifest error, the Bond Trustee may have regard to any evidence which it considers reasonably to rely on (including a certificate from the Issuer as to certain matters) and it must have regard to a Rating Affirmation Notice issued by the Issuer.

The Security Trustee and the Bond Trustee will be obliged to concur in and to effect modifications to the Programme Documents requested by the Trust Manager to: (a) accommodate accession of a new Servicer, new Swap Provider, new Trust Manager, new Account Bank, new Cover Pool Monitor or new Agent if certain conditions are met; (b) accommodate the removal of any one of the Rating Agencies from the Programme or the addition of any Rating Agency, provided that at all times there are at least two rating agencies rating the Programme and any Covered Bonds then outstanding and, in respect of the removal of any one of the Rating Agencies from the Programme only, the proposed modification effecting such removal is not an Objected Modification; (c) take into account any new covered bonds ratings criteria of the Rating Agencies, or any changes or updates to, or any replacement of, the covered bonds ratings criteria of the Rating Agencies (including, without limitation, any manner in which a Rating Agency applies or construes any then existing covered bonds ratings criteria), subject to receipt by the Bond Trustee and the Security Trustee of a Rating Affirmation Notice from the Issuer and receipt by the Bond Trustee and the Security Trustee of a certificate signed by two Authorised Signatories of the Trust Manager each certifying to the Bond Trustee and the Security Trustee that such modifications are required in order to take into account any such new covered bonds ratings criteria of the Rating Agencies, or any such changes or updates to, or any replacement of, the covered bonds ratings criteria of the Rating Agencies; (d) allow a Swap Provider to transfer securities as Swap Collateral under a relevant Swap Agreement Credit Support Document, including to appoint a custodian to hold such securities in a custody agreement; (e) enable N Covered Bonds to be issued under the Programme subject to receipt by the Bond Trustee and the Security Trustee of certain certifications from the Issuer and the Trust Manager; (f) ensure compliance of the Programme, the Issuer or a Swap Provider (as applicable) with, or ensure that the Programme, the Issuer or a Swap Provider (as applicable) may benefit from, any existing, new or amended legislation, regulation, directive, prudential standard or prudential guidance note of any regulatory body (including, without limitation, APRA) in relation to covered bonds (or a Swap) provided that the Trust Manager has certified to the Security Trustee and the Bond Trustee in writing that such modifications are required in order to comply with or benefit from such legislation, regulation, directive, prudential standard or prudential guidance note, as the case may be. For the purposes of providing a certificate to the Bond Trustee and the Security Trustee under this paragraph (f) relating to modifications in connection with a Swap, the Trust Manager may rely on a certification by an Authorised Signatory of the relevant Swap Provider; (g) permit the acquisition (which, without limitation, may be initially in equity only) by the Covered Bond Guarantor from the Seller of Mortgage Loan Rights originated by an entity other than the Seller and to enable the Covered Bond Guarantor to protect or perfect its title to such Mortgage Loan Rights, provided that such Mortgage Loan Rights comply with the Eligibility Criteria at the time of their acquisition by the Covered Bond Guarantor and the Issuer is reasonably satisfied following discussions with the Rating Agencies that the ratings then assigned by the Rating Agencies to any Covered Bonds or the Programme will not be subject to a downgrade, withdrawal or qualification; or (h) accommodate the accession of BOQ Specialist Bank Limited as a new Seller to the Programme provided that (i) the Trust Manager has certified to the Security Trustee and the Bond Trustee in writing that such modifications are required in order to accommodate the addition of BOQ Specialist Bank Limited as a new Seller to the Programme; and (ii) the Trust Manager has certified to the Security Trustee and the Bond Trustee in writing that all other conditions precedent to the accession of BOQ Specialist Bank Limited as a new Seller to the Programme set out in the Programme Documents have been satisfied at the time of the accession.

The Bond Trustee may, without any requirement for the consent of approval of the Covered Bondholders and at the written request of the Issuer in accordance with Condition 4(b)(ii)(A)(III), make the necessary modifications to the Conditions and/or any other Programme Document, to give effect to the proper operation and application of the applicable Fallback Rate as contemplated by Condition 4(b)(ii)(A)(II) in respect of the BBSW Rate. If such modifications are required and except as otherwise provided in Condition 4(b)(ii)(A)(III), the Bond Trustee shall be obliged to concur, and shall be obliged to direct the Security Trustee to concur, with the Issuer in effecting any such amendments. See further Condition 4(b)(ii)(A)(III).

If the Bond Trustee is required to hold an Australian Financial Services Licence and is unable to rely on an exemption or enter into some other arrangement, it may not be able to perform certain obligations required to be performed by it in accordance with the terms of the Bond Trust Deed.

The Bond Trustee does not hold an Australian Financial Services Licence (AFSL). In the event that the Bond Trustee is required to hold an AFSL, and is unable to rely on an exemption from the requirement to hold an AFSL or is unable to enter into some other arrangement, the Bond Trustee may not be able to perform actions otherwise required to be performed by it in accordance with the terms of the Bond Trust Deed (but for the fact that it does not hold an AFSL) in respect of the Australian Covered Bonds. This may affect dealings by the Bond Trustee in respect of the Australian Covered Bonds or under the Covered Bond Guarantee in relation to the Australian Covered Bonds.

Certain decisions of the Covered Bondholders must be taken at Programme level.

Any Extraordinary Resolution to direct the Bond Trustee to serve an Issuer Acceleration Notice following an Issuer Event of Default, to direct the Bond Trustee to serve a Covered Bond Guarantee Acceleration Notice following a Covered Bond Guarantor Event of Default and any direction to the Bond Trustee or Security Trustee to take any enforcement action must be passed at a single meeting of the holders of all Covered Bonds of all Series then outstanding and therefore the holders of a single Series of Covered Bonds may not be able to give any directions to the Bond Trustee or the Security Trustee without the agreement of the holders of other outstanding Series of Covered Bonds.

Neither the Bond Trustee nor the Security Trustee will be bound to take enforcement proceedings in relation to the Bond Trust Deed, the Covered Bonds, the Coupons, the Security or any other Programme Document unless the Bond Trustee or Security Trustee, as applicable, have been indemnified and/or prefunded and/or secured to its satisfaction and provided that in the case of Security Trustee, it will not be bound to take any enforcement proceedings which may, in its opinion, in its absolute discretion, result in it failing to receive any payment to which it is or would be entitled.

There is uncertainty as to the validity and/or enforceability of priority of Excluded Swap Termination Amounts.

There is uncertainty as to the validity and/or enforceability of a provision which (based on contractual and/or trust principles) subordinates certain payment rights of a creditor to the payment rights of other creditors of its counterparty upon the occurrence of insolvency proceedings relating to that creditor.  In particular, recent cases have focused on provisions involving the subordination of a hedging counterparty's payment rights in respect of certain termination payments upon the occurrence of insolvency proceedings on the part of such counterparty.  Such provisions are similar in effect to the terms which are included in the Programme Documents (in particular the Establishment Deed and the Security Deed relating to the Covered Bond Trust) relating to the subordination of Excluded Swap Termination Amounts.

The UK Supreme Court has held that such a subordination provision of the type described above is valid under English law.  However, contrary to the determination of the English Supreme Court, however, the U.S. Bankruptcy Court for the Southern District of New York has held that such a subordination provision is unenforceable under U.S. bankruptcy law and that any action to enforce such provision would violate the automatic stay which applies under such law in the case of a U.S. bankruptcy of the counterparty. However, in a subsequent decision in relation to a similar matter, the U.S. Bankruptcy Court for the Southern District of New York held that such a subordination provision can be enforceable in certain circumstances.  The implications of the conflict in the findings of the English courts and the U.S. Bankruptcy Court remain unresolved at this time. Furthermore, Australia has recently introduced legislation that makes ipso facto clauses unenforceable at this time - see "Risk factors relating to the Covered Bonds - Covered Bondholders' ability to enforce certain rights in connection with the Covered Bonds may be limited or affected by reforms to Australian insolvency legislation relating to "ipso facto" rights"

An appeal against the 2018 U.S. District Court decision has since been filed, however that appeal has not yet been decided. In the interim, the 2018 decision provides comfort that flip clauses will be captured by the safe harbour provisions protecting a swap participant's rights under a swap transaction under the U.S. Bankruptcy Code. The implications of these conflicting judgments of the UK Supreme Court and the U.S. Bankruptcy Court may not be settled until any right of appeal against the 2018 U.S. District Court decision has been exhausted and the position in the United States is resolved.

In particular, based on the first decision of the U.S. Bankruptcy Court referred to above, there is a risk that subordination provisions such as those included in the Programme Documents relating to the subordination of the Excluded Swap Termination Amounts would not be upheld under U.S. bankruptcy laws.  Such laws may be relevant in certain circumstances with respect to a range of entities which may act as Swap Provider, including U.S. established entities and certain non-US established entities with assets or operations in the U.S. (although the scope of any such proceedings may be limited if the relevant non-US entity is a bank with a licensed branch in a U.S. state).  If a subordination provision included in the Programme Documents was successfully challenged under the insolvency laws of any relevant jurisdiction outside Australia and any relevant foreign judgment or order was recognised by the Australian courts, there can be no assurance that such actions would not adversely affect the rights of the Covered Bondholders, the market value of the Covered Bonds and/or the ability of the Issuer to satisfy its obligations under the Covered Bonds.

Given the general relevance of the issues under discussion in the judgments referred to above, the uncertainty regarding the proposed reforms to Australian insolvency laws and that the Programme Documents include terms providing for the subordination of Excluded Swap Termination Amounts, there is a risk that the final outcome of the dispute in such judgments (including any recognition action by the Australian courts) or of any proposed reform may result in negative rating pressure in respect of the Covered Bonds.  If any rating assigned to the Covered Bonds is lowered, the market value of the Covered Bonds may reduce.

APRA's powers under the Australian Banking Act

APRA has the power to direct the Covered Bond Guarantor to return certain assets to the Issuer, which may affect the ability of the Covered Bond Guarantor to meet its obligations under the Covered Bond Guarantee.

The Australian Banking Act provides that, in certain circumstances, APRA has the power to direct the Covered Bond Guarantor to return certain assets to the Issuer.  The Covered Bond Guarantor will be required to comply with APRA's direction despite anything in its constitution or any contract or arrangement to which it is a party.

Specifically, APRA has the power to direct the Covered Bond Guarantor to return to the Issuer an Asset of the Trust which is held by the Covered Bond Guarantor to the extent that, at the time the direction is given, that Asset of the Trust does not secure "covered bond liabilities".  A "covered bond liability" (as defined in the Australian Banking Act) is a liability of the Issuer or the Covered Bond Guarantor to covered bondholders and any other liability which is secured by assets beneficially owned by the Covered Bond Guarantor.  A liability of the Covered Bond Guarantor to the Issuer (other than a liability relating to derivatives or the provision of services) which is secured in priority to any liability to holders of Covered Bonds is not a "covered bond liability".  Accordingly, APRA may direct the Covered Bond Guarantor to return Assets forming part of the Trust held by the Covered Bond Guarantor from time to time which secure such senior-ranking liabilities of the Covered Bond Guarantor to the Issuer.  In the context of the Programme, if a Regulatory Event has occurred or is likely to occur, this means that APRA will have the power to direct the Covered Bond Guarantor to return to the Issuer any Assets of the Trust which secure the repayment of the Demand Note in respect of the Senior Demand Note Component as such amounts will at that point in time rank senior to the amounts due and payable by the Covered Bond Guarantor to the Covered Bondholders and Couponholders under the applicable Priority of Payments.

Under the Australian Prudential Standard APS 121 (Covered Bonds), the Issuer is required to maintain an accurate and up-to-date register of the Assets of the Trust which secure "covered bond liabilities".

APRA's power to give a direction to the Covered Bond Guarantor as described in this section is also subject to secrecy requirements, which means that investors will not receive any notice or otherwise be aware that APRA has given the Covered Bond Guarantor any such direction.

If APRA exercises its power to direct the return of assets to the Issuer, this may adversely affect the ability of the Covered Bond Guarantor to meet its obligations under the Covered Bond Guarantee.

APRA has the power to prevent additional sales to meet the Asset Coverage Test on any day, which could affect the ability of the Covered Bond Guarantor to meet its obligations under the Covered Bond Guarantee.

The Australian Banking Act permits APRA to direct the Issuer, in certain circumstances, not to transfer any asset to the Covered Bond Guarantor (that is, to prevent the Issuer "topping up" the Assets of the Trust).  Those circumstances include where APRA has reason to believe that the Issuer is unable to meet its liabilities, there has been a material deterioration in the Issuer's financial condition, the Issuer is conducting its affairs in an improper or financially unsound way, the failure to issue a direction would materially prejudice the interests of the Issuer's depositors or the Issuer is conducting its affairs in a way that may cause or promote instability of the Australian financial system.  This exercise of this power could potentially lead to the depletion of the Assets of the Trust which may adversely affect the ability of the Covered Bond Guarantor to meet its obligations under the Covered Bond Guarantee.

APRA has the power to prevent further issues of covered bonds by the Issuer.

Apart from and in addition to the Australian Banking Act restriction that the Issuer is precluded from issuing covered bonds if, at the time of issuance, the value of the assets in all cover pools maintained by the ADI exceeds eight per cent. (or such other percentage prescribed by regulation for the purposes of section 28 of the Australian Banking Act) of the ADI's assets in Australia at that time, APRA has the power to direct the Issuer not to issue covered bonds pursuant to section 11CA of the Australian Banking Act or in circumstances where APRA has reason to believe that the ADI has contravened the covered bond provisions of the Australian Banking Act, the Australian Banking Act or any other prudential requirement regulation or a prudential standard relating to covered bonds.

Mortgage Loans are regulated by the consumer credit legislation, which may affect the timing or amount of principal repayments under the relevant Mortgage Loans and which may in turn affect the timing or amount of payments by the Covered Bond Guarantor under the Covered Bond Guarantee when due.

The National Consumer Credit Protection Act 2009 (NCCP Act), which includes the National Credit Code (Credit Code), commenced on 1 July 2010.

The Credit Code applies (with some limited exceptions) to Mortgage Loans that had previously been regulated under the Consumer Credit Code and also to all new consumer Mortgage Loans made after 1 July 2010.

The NCCP Act incorporates a requirement for providers of credit related services to hold an "Australian Credit Licence" and to comply with "responsible lending" requirements, including a mandatory "unsuitability assessment". A credit provider's responsible lending assessment must be made before a loan is made or there is an agreed increase in the amount of credit under a loan.

The responsible lending obligations under the NCCP Act are broadly expressed. In recent years, there have been a number of Federal Court decisions, regulatory guidance from ASIC and actions which ASIC has taken against licensees, including issuing infringement notices. The practical effect of these developments, among other things, is that the interpretation of, and guidance in relation to, these obligations can change, particularly in respect of whether a credit licensee has taken sufficient steps to comply with its responsible lending obligations.Obligations of a credit provider under the NCCP Act extend to the Seller and, following a perfection of title by the Covered Bond Guarantor in respect of any Mortgage Loans, the Covered Bond Guarantor and their respective service providers (including the Servicer) in respect of the Mortgage Loans.

Under the terms of the Credit Code each of the Seller and, following a perfection of title by the Covered Bond Guarantor in respect of any Mortgage Loans, the Covered Bond Guarantor would be a "credit provider" with respect to regulated loans, and as such is exposed to civil and criminal liability for certain violations.  These include violations caused in fact by the Servicer.  The Servicer has indemnified the Covered Bond Guarantor for any civil or criminal penalties in respect of Credit Code violations caused by the Servicer (except to the extent such penalties arise as a result of the fraud, negligence or wilful default of the Covered Bond Guarantor).  There is no guarantee that the Covered Bond Guarantor will have the financial capability to pay any civil or criminal penalties which arise from Credit Code violations.

If for any reason the Servicer does not discharge its obligations to the Covered Bond Guarantor, then the Covered Bond Guarantor will be entitled to indemnification from the Assets of the Trust.  Any such indemnification may reduce the amounts available to the Covered Bond Guarantor to make payments under the Covered Bond Guarantee when due.

Under the Credit Code, a Borrower in relation to a regulated Mortgage Loan may have the right to apply to a court to:

(a)        vary the Mortgage Conditions applicable to that Mortgage Loan on the grounds of hardship or that it is an unjust contract;

(b)        reduce or cancel any interest rate payable on the Mortgage Loan which is unconscionable;

(c)        have certain provisions of the Mortgage Loan or related Mortgage which are in breach of the legislation declared unenforceable; or

(d)        obtain restitution or compensation in relation to any breach of the Credit Code.

Any order made under any of the above consumer credit laws may affect the timing or amount of principal repayments under the relevant Mortgage Loans which may in turn affect the timing or amount of payments by the Covered Bond Guarantor under the Covered Bond Guarantee when due.

Changes of law and/or regulatory, accounting and/or administrative practices could adversely affect the ability of the Issuer and the Covered Bond Guarantor to satisfy their payment obligations when due.

The structure of the issue of the Covered Bonds and the credit ratings which are to be assigned to them are based on Australian law, regulatory, accounting and administrative practice in effect as at the date of this Prospectus and having due regard to the expected tax treatment of all relevant entities under Australian tax law and the published practice of the Australian Taxation Office in force or applied in Australia as at the date of this Prospectus.  No assurance can be given as to the impact of any possible change to Australian law, regulatory, accounting or administrative practice in Australia or to Australian tax law, or the interpretation or administration thereof, or to the published practice of the Australian Taxation Office as applied in Australia after the date of this Prospectus, nor can any assurance be given as to whether any such change would adversely affect the ability of the Issuer to make payments under the Covered Bonds or the ability of the Covered Bond Guarantor to make payments under the Covered Bond Guarantee when due.

In addition, no assurance can be given that additional regulations, laws or guidance from regulatory authorities in Australia will not arise with regard to the mortgage market in Australia generally, the Seller's particular sector in that market, specifically in relation to the Seller or in relation to the issuance of covered bonds by deposit-taking institutions regulated under the Australian Banking Act.  Any such action or developments or compliance costs may have a material adverse effect on the Mortgage Loan Rights, the Seller, the Covered Bond Guarantor, the Issuer and/or the Servicer and their respective businesses and operations.  This may adversely affect the ability of the Covered Bond Guarantor to dispose of Mortgage Loan Rights forming part of the Assets of the Trust in a timely manner and/or the realisable value of the Mortgage Loan Rights forming part of the Assets of the Trust and accordingly affect the ability of the Covered Bond Guarantor to meet its obligations under the Covered Bond Guarantee when due.

The Anti-Money Laundering and Counter-Terrorism Financing Act may result in a delay or decrease in the amounts received by a Covered Bondholder in respect of the Covered Bonds.

The AML/CTF Act regulates reporting entities.  Reporting entities are identified by reference to a list of various designated services. These include making a loan in the course of carrying on a loan business or the issuing or selling of a security (e.g., a share or debenture) by a company (other than a security in the company itself).  The AML/CTF Act imposes the following key obligations (among others) on reporting entities:

(a)        registering with the regulator AUSTRAC and paying relevant fees;

(b)        adopting and complying with an AML/CTF programme in managing compliance with their AML/CTF obligations and in verifying customer identities;

(c)        verifying customer identities and collecting customer information;

(d)        reporting suspicious transactions, significant cash transactions (being transfers of A$10,000 or more) and international funds transfer instructions;

(e)        retaining records; and

(f)        conducting ongoing due diligence of customers in relation to money laundering and financing of terrorism risks.

The AML/CTF Act operates in conjunction with the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (the AML/CTF Rules) and any other Anti-Money Laundering and Counter-Terrorism Financing rules which may be made by the Chief Executive Officer of the AUSTRAC from time to time. Among other things, the AML/CTF Rules outline more detailed risk-based requirements for verifying customer identities and monitoring customer transactions on an ongoing basis. Contravention of the AML/CTF Act attracts certain civil and criminal penalties of fines up to A$22.2 million and imprisonment for up to 10 years.

The obligations placed upon a reporting entity can affect the services of an entity or the funds it provides and ultimately may result in a delay or decrease in the amounts received by a Covered Bondholder in respect of the Covered Bonds.

If the security interests arising under the Programme Documents are not perfected, such security interests may not have priority over competing interests.

A personal property securities regime commenced operation throughout Australia on 30 January 2012 pursuant to the Personal Property Securities Act 2009 (Cth) (PPSA).  The PPSA adopts a "functional approach" to security interests.  This means that the PPSA regulates any interest in relation to personal property that, in substance, secures payment or performance of an obligation.  In addition, the PPSA regulates security interests which are deemed to arise upon the transfer of certain types of assets (including loans); these are generally referred to as "deemed security interests".  The PPSA does not regulate the granting of security interests in land.

The PPSA applies not only to security interests which come into existence after 30 January 2012, but also to security interests evidenced by agreements that were already in existence as at 30 January 2012. This type of security interest is referred to as a "transitional security interest".  Generally, in order to be perfected under the PPSA, a security interest, whether or not it is a transitional security interest, should be registered on the register maintained pursuant to the PPSA (the PPS Register).  Where a transitional security interest was already registered on an existing public register, such as under the Corporations Act charges registration regime, as at 30 January 2012 that security interest should have been migrated by the Australian federal government to the PPS Register and thereby perfected under the PPSA.  Transitional security interests which were not registered on any existing public register as at 30 January 2012 (such as any deemed security interest arising before 30 January 2012) were temporarily perfected under the PPSA for a period of 2 years from 30 January 2012 and needed to have been registered within that 2 year period in order to preserve priority rights.

If the details held by the relevant existing public register in relation to a transitional security interest are incorrect or insufficient or if, as a result of human or systemic error those details were not properly migrated to the PPS Register, or there is not a separate registration within the two year period, there is a risk that other persons with competing interests in the personal property may take free of that security interest because it will not have been perfected. In addition, if the security interest is unperfected, the holder of the security interest or the owner of the personal property may not be able to enforce that security interest or claim title to the personal property (as the case may be) if the security provider becomes insolvent.

The Trust Manager has arranged for security interests arising under the Programme Documents (or a transaction in connection with them other than the Mortgage Loans or the Mortgages themselves) to be perfected under the PPSA.

There is uncertainty on aspects of the implementation of the PPSA regime because the PPSA significantly altered the law relating to secured transactions. There are issues and ambiguities in respect of which a market view or practice will evolve over time.

Implementation of the PPSA may adversely affect the value of the Assets of the Trust and, accordingly, the ability of the Covered Bond Guarantor to make payments under the Covered Bond Guarantee when due.

The operation of the PPSA was recently the subject of statutory review.. The terms of reference for that review were generally aimed at simplification and clarification of certain aspects of the PPSA.  The final report prepared pursuant to this review was released publicly in March 2015.  At this stage, there is uncertainty as to whether any or all of the recommendations made by the review will ultimately be adopted and result in changes to the PPSA and, if ultimately adopted, the timing and impact of such changes.

A legal regime governing unfair terms applies to certain Mortgage Loans and Mortgage Documents.

The terms of a Mortgage Loan or a related mortgage or guarantee may be subject to review for being "unfair" under Part 2 of the Australian Competition and Consumer Act 2010 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and/or Part 2B of the Fair Trading Act 1999 (Vic) (the Fair Trading Act), depending on when the relevant credit contract was entered into.

From 1 January 2011 the unfair contract terms provisions in the ASIC Act have been aligned to the equivalent provisions in the Australian Consumer Law (the ACL) contained at Schedule 2 of the Australian Competition and Consumer Act 2010 (Cth), a single, Australian national consumer law which replaces provisions in 17 Australian national, State and Territory consumer laws. The unfair contract terms regime under the ASIC Act commenced on 1 July 2010, while the application of the unfair contract terms regime to credit contracts under the Fair Trading Act commenced in June 2009.

The regime under the ASIC Act and/or the Fair Trading Act may apply to a Mortgage Loan or a related mortgage or guarantee depending on when it was entered into; however, given that the unfair contract terms provisions in the Fair Trading Act have now been repealed in favour of the ACL, a Mortgage Loan or a related mortgage or guarantee entered into after 1 January 2011 will only be subject to the ASIC Act.  Mortgage Loans or a related mortgage or guarantee entered into become subject to the ASIC Act regime going forward if those contracts are renewed or a term is varied (although where a term is varied, the regime only applies to the varied term).  The Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 (Cth) came into force on 12 November 2016 and has the effect of extending the national regime to small business contracts. The Mortgage Loans that will be affected are those where: at least one party is a business that employs less than 20 people and the upfront price payable under the contract is: A$300,000 or less; or A$1,000,000 or less, if the contract is for more than 12 months

Under the ASIC Act and/or the Fair Trading Act, as applicable, unfair terms in standard form consumer contracts and small business contracts will be void. However, a contract will continue to bind the parties to the contract to the extent that the contract is capable of operating without the unfair term. Relevantly, the contracts documenting Mortgage Loans or a related mortgage or guarantee will be considered standard form contracts.

Under the ASIC Act and/or the Fair Trading Act, as applicable, a term of a standard-form consumer contract or a standard form small business contract will be unfair, and therefore void, if it is a proscribed unfair term (in the case of a consumer contract subject to the Fair Trading Act only) or it causes a significant imbalance in the parties' rights and obligations under the contract, is not reasonably necessary to protect the supplier's legitimate interests (in the case of consumer contracts entered into, renewed or varied on or after 1 June 2010 and in the case of small business contracts entered into, renewed or varied on or after 12 November 2016) and would cause detriment to the consumer or small business (as applicable) if it were relied on. Therefore the effect of this provision will depend on the actual term of the agreement or contract that was declared unfair.

Although the relevant legislation outlines examples of what is considered to be unfair terms in contracts, to date there is limited case law as to how the courts will interpret these provisions.

Any determination by a court or tribunal that a term of a Mortgage Loan or a related mortgage or guarantee is void under the ASIC Act and/or the Fair Trading Act due to it being unfair may adversely affect the timing or amount of any payments thereunder (which might in turn affect the timing or amount of interest or principal payments under the Covered Bonds).

On 6 November 2020, the Commonwealth, State and Territory consumer affairs ministers announced that they would strengthen unfair contract terms laws including by creating civil penalties for breaches of those laws. Exposure draft legislation was released on 23 August 2021 and the consultation process was completed on 20 September 2021.

 

Principal Characteristics of the Programme

 

The following synopsis does not purport to be complete and is taken from, and is qualified in its entirety by the information contained in the remainder of this Prospectus.  For further information, namely regarding the Asset Coverage Test and the Amortisation Test, please see "Overview of the Principal Documents".

Issuer:	Bank of Queensland Limited ABN 32 009 656 740, is a public limited company incorporated in the Commonwealth of Australia and its registered office is Level 6, 100 Skyring Terrace, Newstead Queensland 4006, Australia (BOQ).
Covered Bond Guarantor:	Perpetual Corporate Trust Limited ABN 99 000 341 533, incorporated with limited liability in the Commonwealth of Australia and having its registered office at Level 18, 123 Pitt Street, Sydney, NSW 2000, as trustee of the BOQ Covered Bond Trust (the Trustee).
Nature of eligible property:	Mortgage Loan Rights, Substitution Assets (not exceeding the prescribed limit) and Authorised Investments.
Location of eligible residential property securing Mortgage Loans:	Australia.
Programme Asset Percentage (Maximum Asset Percentage):	90.9%.
Asset Coverage Test:	Yes, see "Credit Structure" and "Overview of the Principal Documents - the Establishment Deed - Asset Coverage Test".
Amortisation Test:	Yes, see "Credit Structure" and "Overview of the Principal Documents - the Establishment Deed - Amortisation Test".
Legislated Collateralisation Test:	Yes, see "Structure Overview - Structure Overview - Legislated Collateralisation Test."
Reserve Fund:	A Reserve Fund of an amount up to the Reserve Fund Required Amount will be established to trap a specified amount of the Available Income Amount and/or (after the service of a Notice to Pay on the Covered Bond Guarantor but prior to the service of a Covered Bond Guarantee Acceleration Notice on the Covered Bond Guarantor and the Issuer) the Available Principal Amount, the proceeds of the issue of Intercompany Notes or the Demand Note (or the proceeds of any Increase in the Demand Note) for so long as BOQ's credit ratings are below the Moody's Specified Rating and/or the Fitch Specified Ratings.
Extendable Maturities:	Yes. The obligations of the Covered Bond Guarantor to pay all or (as applicable) part of the Final Redemption Amount payable on the Final Maturity Date in respect of a Series of Covered Bonds may be deferred, in accordance with Condition 6(a), if (a) the Issuer has failed to pay the Final Redemption Amount on the Final Maturity Date in respect of that Series of Covered Bonds; or (b) following an Issuer Event of Default (i) in accordance with Condition 9(a) (other than in accordance with Condition 9(a)(i) as a result of a failure to pay the Final Redemption Amount in respect of a Series of Covered Bonds) and service of a Notice to Pay on the Covered Bond Guarantor or (ii) in accordance with Condition 9(a)(i) as a result of a failure to pay the Final Redemption Amount in respect of a Series of Covered Bonds where such Series of Covered Bonds has been redeemed in full, and such Covered Bonds are then the Earliest Maturing Covered Bonds; or (c) at any time following the service of a Notice to Pay on the Covered Bond Guarantor, the Amortisation Test has been breached and the Bond Trustee serves an Amortisation Test Breach Notice on the Issuer and the Covered Bond Guarantor. In the circumstances described in paragraph (c), the deferral will extend to all Series of Covered Bonds. Where a Series of Covered Bonds is extended in accordance with the above, such Series of Covered Bonds will become Pass-Through Covered Bonds and the obligations of the Covered Bond Guarantor will be deferred until the date (being the Extended Due for Payment Date) which is the earlier of (a) the date which falls 31.5 years after the Final Maturity Date in relation to that Series of Covered Bonds; (b) the date which falls 31.5 years after the Conversion of that Series of Covered Bonds; and (c) the date which falls 31.5 years after an Amortisation Test Breach Notice is served on the Covered Bond Guarantor and the Issuer, following the service of a Notice to Pay on the Covered Bond Guarantor (the Conversion Event Date).
Cover Pool Monitor:	KPMG having its registered office at Riparian Plaza, 71 Eagle Street, Brisbane QLD 4000, Australia.
Asset Segregation:	Yes.
Terms:	As set out in the Applicable Final Terms for the relevant Series or Tranche of Covered Bonds (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement).
Clearing Systems:	Covered Bonds (other than A$ Registered Covered Bonds) may be traded on the settlement system operated by Euroclear, the settlement system operated by Clearstream, Luxembourg and/or any other clearing system outside Australia specified in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement).
	The Issuer announces that: (a) each Tranche of Bearer Covered Bonds will be initially issued in the form of a temporary global covered bond without interest coupons attached (a Temporary Bearer Global Covered Bond) which will be issued to and lodged with on or prior to the issue date of the relevant Tranche a common depositary for Euroclear and Clearstream, Luxembourg; (b) in connection with the issue, Euroclear and Clearstream, Luxembourg will confer rights in relation to such Tranche of Bearer Covered Bonds and will record the existence of those rights and (c) as a result of the issue of such Tranche of Bearer Covered Bonds in this manner, these rights will be able to be created.
	The Issuer may apply to Austraclear Limited ABN 94 002 060 773 (Austraclear) for approval for the A$ Registered Covered Bonds to be traded on the settlement system operated by Austraclear (Austraclear System). Such approval of the A$ Registered Covered Bonds by Austraclear is not a recommendation or endorsement by Austraclear of the A$ Registered Covered Bonds.
Listing and admission to trading:	Application has been made to admit the Covered Bonds issued under the Programme and pursuant to this Prospectus to the Official List and to admit the Covered Bonds to trading on the main market of the London Stock Exchange.
	Neither Perpetual Corporate Trust Limited (in its personal capacity or as Covered Bond Guarantor) nor P.T. Limited (in its personal capacity or as Security Trustee) have made or authorised the application to admit Covered Bonds issued under the Programme to the Official List or to admit the Covered Bonds to trading on the main market of the London Stock Exchange.
	Exempt Covered Bonds may be unlisted or may be listed or admitted to trading, as the case may be, on such other or further stock exchanges or regulated or unregulated markets, as may be agreed between the Issuer and the Relevant Dealer(s) or Lead Manager in relation to each issue. The Applicable Pricing Supplement, in the case of Exempt Covered Bonds, will state whether or not the relevant Exempt Covered Bonds are to be listed and/or admitted to trading and, if so, on which stock exchanges and/or markets. Any A$ Registered Covered Bonds issued under the Programme may be unlisted.
Option to issue Namensschuldverschreibungen:	Subject to the consent of the Bond Trustee (which must be given if certain conditions are met), the Issuer may amend the Programme to allow for the issue of registered bonds in the form of German law governed Namensschuldverschreibungen (N Covered Bonds). N Covered Bonds will not be listed on any stock exchange and the certificate evidencing the N Covered Bonds will be kept in the custody of the custodian of the N Covered Bond. N Covered Bonds will rank pari passu with all other Covered Bonds and, upon entry of the N Covered Bondholder into an N Covered Bond agreement which will be set out in a schedule to the Bond Trust Deed, all payments of principal and interest payable under the N Covered Bonds will be guaranteed by the Covered Bond Guarantor pursuant to the terms of the Covered Bond Guarantee.

 

Structure Overview

The information in this section is an overview of the structure relating to the Programme and does not purport to be complete.  This Structure Overview must be read as an introduction to this Prospectus and any decision to invest in any Covered Bonds should be based on a consideration of this Prospectus as a whole, including the documents incorporated herein by reference.

Words and expressions defined elsewhere in this Prospectus will have the same meanings in this Structure Overview.

Structure Diagram

 

Structure Overview

Programme

Pursuant to the terms of the Programme, the Issuer will issue Covered Bonds to the Covered Bondholders on each Issue Date.  The Covered Bonds will be direct, unsecured, unsubordinated and unconditional obligations of the Issuer.

The Issuer's indebtedness under the Covered Bonds will not be a protected account for the purposes of the Financial Claims Scheme in Division 2AA of Part II of the Australian Banking Act, will not be a deposit liability of the Issuer for the purposes of the Australian Banking Act and is not guaranteed or insured by any government, government agency or compensation scheme of Australia or any other jurisdiction.  If the Issuer becomes unable to meet its obligations or suspends payment, its assets in Australia are to be available to meet its indebtedness evidenced by the Covered Bonds only after the liabilities referred to in section 13A(3)(a) - (e) of the Australian Banking Act have been met. The Australian Banking Act provides that the Issuer's assets in Australia for these purposes do not include the assets in the Cover Pool.

Covered Bond Guarantee

 

Pursuant to the terms of the Bond Trust Deed, the Covered Bond Guarantor has guaranteed payments of interest and principal under the Covered Bonds issued by the Issuer.  The Covered Bond Guarantor has agreed to pay an amount equal to the Guaranteed Amounts which would otherwise be unpaid by the Issuer.  The obligations of the Covered Bond Guarantor under the Covered Bond Guarantee constitute direct, absolute and (following service of an Issuer Acceleration Notice and Notice to Pay or a Covered Bond Guarantee Acceleration Notice) unconditional obligations of the Covered Bond Guarantor, secured as provided in the Security Deed and limited in recourse against the Covered Bond Guarantor.  The Bond Trustee will be required to serve a Notice to Pay on the Covered Bond Guarantor following the occurrence of an Issuer Event of Default and service by the Bond Trustee of an Issuer Acceleration Notice on the Issuer (whereupon the Covered Bonds will become immediately due and payable as against the Issuer but not at such time as against the Covered Bond Guarantor).

A Covered Bond Guarantee Acceleration Notice may be served by the Bond Trustee on the Issuer and the Covered Bond Guarantor (copied to the Trust Manager and the Security Trustee) following the occurrence of a Covered Bond Guarantor Event of Default.  If a Covered Bond Guarantee Acceleration Notice is served, the Covered Bonds will become immediately due and payable as against the Issuer (if they have not already become due and payable) and the obligations of the Covered Bond Guarantor under the Covered Bond Guarantee to pay Guaranteed Amounts will be accelerated and the Security Trustee will be entitled to enforce the Security.  Payments made by the Covered Bond Guarantor under the Covered Bond Guarantee will be made subject to, and in accordance with, the Guarantee Priority of Payments. Payments made by the Security Trustee will be made subject to, and in accordance with, the Post-Enforcement Priority of Payments, as applicable.

Payment of the unpaid amount in respect of a Series of Covered Bonds by the Covered Bond Guarantor may be deferred until the Extended Due for Payment Date, being, in respect of a Series of Covered Bonds, the earlier of (a) the date which falls 31.5 years after the Final Maturity Date in relation to that Series of Covered Bonds; (b) the date which falls 31.5 years after the Conversion of that Series of Covered Bonds; and (c) the date which falls 31.5 years after the Conversion Event Date. For further details see the section "General Description of the Programme - Extendable obligations under the Covered Bond Guarantee and Conditional Pass-Through Covered Bonds".

Intercompany Note Subscription Agreement

Pursuant to the terms of the Intercompany Note Subscription Agreement, BOQ as Intercompany Note Subscriber has agreed to subscribe for Intercompany Notes issued by the Covered Bond Guarantor in an amount equal to, the Principal Amount Outstanding (or the Australian Dollar Equivalent thereof) on the Issue Date of each Series or, as applicable, each Tranche of Covered Bonds, and for a matching term.  The Intercompany Notes will be denominated in the same currency as the relevant Series or Tranche of Covered Bonds or in Australian Dollars.  Payments by the Issuer of amounts due under the Covered Bonds will not be conditional upon receipt by BOQ of payments from the Covered Bond Guarantor in respect of the Intercompany Notes.  Payments by the Covered Bond Guarantor in respect of the Intercompany Notes will be subordinated to amounts owed by the Covered Bond Guarantor to the Covered Bondholders under the Covered Bond Guarantee in accordance with the Guarantee Priority of Payments and the Post‑Enforcement Priority of Payments.

The proceeds of issue of Intercompany Notes

The Covered Bond Guarantor will use the proceeds of issue of Intercompany Notes to BOQ under the Intercompany Note Subscription Agreement from time to time (if not denominated in Australian Dollars, upon exchange into Australian Dollars under the applicable Covered Bond Swap): (i) to fund (in whole or part) the Consideration for Mortgage Loan Rights to be purchased from the Seller in accordance with the terms of the Mortgage Sale Agreement; (ii) if Mortgage Loan Rights are purchased from the Seller in advance of a Series or Tranche of Covered Bonds using the proceeds from the issue of, or Increase in, the Demand Note, to make a repayment of the Demand Note in an amount equal to the Series or Tranche of Covered Bonds issued which relate to those Intercompany Notes and/or (iii) to invest in Substitution Assets in an amount not exceeding the prescribed limits (as described in "Overview of the Principal Documents - Establishment Deed - Limit on Investing in Substitution Assets and Authorised Investments") to the extent required to meet the Asset Coverage Test; and thereafter the Covered Bond Guarantor may use such proceeds (subject to compliance with the Asset Coverage Test): (A) if an existing Series or Tranche or part of an existing Series or Tranche of Covered Bonds is being refinanced by the issue of a further Series or Tranche of Covered Bonds to which the Intercompany Note being issued relates, to repay the Intercompany Note(s) corresponding to the Covered Bonds being so refinanced (after exchange into the currency of the Intercompany Note(s) being repaid, if necessary); and/or (B) to make a repayment of the Demand Note; and/or (C) to make a deposit of all or part of the proceeds into the GIC Account (including, without limitation, to fund the Reserve Fund to an amount not exceeding the Reserve Fund Required Amount).

Demand Note Subscription Agreement

Pursuant to the Demand Note Subscription Agreement, BOQ as Demand Note Subscriber will subscribe for a Demand Note to be issued by the Covered Bond Guarantor and will subscribe for further Increases in the Demand Note, as requested by the Covered Bond Guarantor from time to time in accordance with the Demand Note Subscription Agreement.  The Demand Note will be denominated in Australian Dollars.  The proceeds of the issue of, and Increase in, the Demand Note may only be used by, or on behalf of, the Covered Bond Guarantor: (i) as Consideration (in whole or in part) for the acquisition of Mortgage Loan Rights from the Seller on a Closing Date; (ii) to prevent or rectify a failure to meet the Asset Coverage Test; (iii) to rectify an Interest Rate Shortfall; (iv) to fund repayment by the Covered Bond Guarantor of any outstanding Intercompany Note; (v) to make a deposit to the Reserve Fund or (vi) for any purpose whatsoever (other than any purpose contemplated by any of the preceding paragraphs (i) to (vi)) as may be agreed from time to time between the Covered Bond Guarantor (acting at the direction of the Trust Manager) and the Demand Note Subscriber.

Amounts due and payable by the Covered Bond Guarantor in respect of the Demand Note will be repaid or otherwise satisfied as set out below:

·          if a Regulatory Event has occurred or is likely to occur (as determined by the Issuer and notified to the Covered Bond Guarantor and the Trust Manager), in respect of the Senior Demand Note Component only by:

·          way of set-off by application of the proceeds of the issue of Intercompany Notes as described in "Intercompany Note Subscription Agreement - The proceeds of issue of Intercompany Notes" above; or

·          in specie distribution of Mortgage Loan Rights (the value of which will be determined by reference to the Current Principal Balance plus any accrued interest or arrears of interest in respect of the corresponding Mortgage Loans calculated as at the date of the in specie distribution) to the Demand Noteholder;

·          in respect of the Junior Demand Note Component, be subordinated to amounts due and payable by the Covered Bond Guarantor to the Covered Bondholders and Couponholders under the Covered Bond Guarantee and to the Intercompany Noteholder under the Intercompany Notes, as applicable, under the applicable Priorities of Payments. Such amounts may be satisfied by in specie distribution, at the discretion of the Trust Manager.

There will be no Senior Demand Note Component in relation to the Demand Note unless a Regulatory Event has occurred or is likely to occur and the Issuer has notified the Covered Bond Guarantor and the Trust Manager.

For further details see the section "Overview of the Principal Documents - Demand Note Subscription Agreement".

Security

To secure its obligations under the Covered Bond Guarantee and the Programme Documents to which it is a party, the Covered Bond Guarantor will grant security over the Charged Property (which consists of the Assets of the Trust held by the Covered Bond Guarantor from time to time, including the Covered Bond Guarantor's interest in the Mortgage Loan Rights, the Substitution Assets, the Authorised Investments, the Programme Documents to which it is a party and the Trust Accounts) in favour of the Security Trustee (to be held by the Security Trustee on trust for each Secured Creditor) pursuant to the Security Deed.

Cashflows

Pre-Issuer Event of Default Income Priority of Payments and Pre-Issuer Event of Default Principal Priority of Payments

Prior to service of a Notice to Pay on the Covered Bond Guarantor and/or service of a Covered Bond Guarantee Acceleration Notice on the Covered Bond Guarantor and the Issuer, the Trust Manager must direct the Covered Bond Guarantor to and, upon receiving that direction, the Covered Bond Guarantor will:

(a)        apply the Available Income Amount (i) to pay interest due and payable on the Intercompany Notes; and/or (ii) to pay interest due and payable on the Demand Note.  However, these payments will only be made after payment of certain items ranking higher in the Pre-Issuer Event of Default Income Priority of Payments; and

(b)        apply the Available Principal Amount towards repayment of the Demand Note and the Intercompany Notes but only after payment of certain items ranking higher in the Pre-Issuer Event of Default Principal Priority of Payments. 

Application of moneys following service of an Asset Coverage Test Breach Notice

At any time after service on the Covered Bond Guarantor of an Asset Coverage Test Breach Notice (which has not been revoked), but prior to service of an Issuer Acceleration Notice (or, if earlier, the occurrence of a Covered Bond Guarantor Event of Default and service of a Covered Bond Guarantee Acceleration Notice on the Covered Bond Guarantor and the Issuer), the Available Income Amount and the Available Principal Amount will continue to be applied in accordance with the Pre-Issuer Event of Default Income Priority of Payments or Pre-Issuer Event of Default Principal Priority of Payments, as applicable, save that, whilst any Covered Bonds remain outstanding, no moneys will be applied to (i) acquire New Mortgage Loan Rights to ensure compliance with the Asset Coverage Test, (ii) redeem or pay interest on the Intercompany Notes or (except in limited circumstances) the Demand Note, (iii) pay the purchase price for Mortgage Loan Rights sold to the Covered Bond Guarantor in accordance with the Mortgage Sale Agreement (see further "Overview of the Principal Documents - Mortgage Sale Agreement -  Sale by the Seller of Mortgage Loan Rights"), (iv) reimburse the Seller for funding Further Advances, or (v) pay distributions to the Income Unitholder or the Capital Unitholders, and the remainder (if any) will be retained in the GIC Account (with a corresponding credit to the Income Ledger or Principal Ledger, as applicable) and will form part of the Available Income Amount or Available Principal Amount, as the case may be, on the next succeeding Distribution Date.

Application of moneys following service of a Notice to Pay

Following service on the Covered Bond Guarantor of a Notice to Pay (but prior to a Covered Bond Guarantor Event of Default and service of a Covered Bond Guarantee Acceleration Notice on the Covered Bond Guarantor and the Issuer) the Covered Bond Guarantor will use all moneys (other than certain amounts due to third parties and Swap Collateral Excluded Amounts) to pay Guaranteed Amounts in respect of the Covered Bonds when the same become Due for Payment, subject to paying certain higher ranking obligations of the Covered Bond Guarantor in the Guarantee Priority of Payments (including, if the Issuer has determined and notified to the Trust Manager and the Covered Bond Guarantor that a Regulatory Event has occurred or is likely to occur, in respect of the Senior Demand Note Component).  In such circumstances, the Intercompany Noteholders, the Demand Noteholder (except as specified above) and BOQ as the Income Unitholder and the Capital Unitholder will only be entitled to receive any remaining income of the Trust after all amounts referred to above have been paid or have otherwise been provided for in full.

Acceleration of the Covered Bonds

Following the occurrence of a Covered Bond Guarantor Event of Default and service of a Covered Bond Guarantee Acceleration Notice on the Covered Bond Guarantor and the Issuer, the Covered Bonds will become immediately due and repayable (if not already due and payable as against the Issuer) and the Bond Trustee will then have a claim against the Covered Bond Guarantor under the Covered Bond Guarantee for an amount equal to the Early Redemption Amount in respect of each Covered Bond together with accrued interest and any other amounts due under the Covered Bonds (other than additional amounts payable by the Issuer under Condition 7) and the Security created by the Covered Bond Guarantor over the Charged Property will become enforceable.  Any moneys received or recovered by the Security Trustee following enforcement of the Security granted by the Covered Bond Guarantor over the Charged Property will be distributed according to the Post-Enforcement Priority of Payments (other than any Swap Collateral Excluded Amounts).

Asset Coverage Test

To protect the value of the Mortgage Loan Rights forming part of the Assets of the Trust, the Establishment Deed provides that, for so long as any Covered Bonds remain outstanding, the Trust Manager must ensure that on each Determination Date prior to the service of a Notice to Pay on the Covered Bond Guarantor and/or a Covered Bond Guarantee Acceleration Notice on the Covered Bond Guarantor and the Issuer, the Asset Coverage Test is satisfied.  Accordingly, for so long as Covered Bonds remain outstanding, the Trust Manager must ensure that on each Determination Date prior to the service of a Notice to Pay on the Covered Bond Guarantor and/or a Covered Bond Guarantee Acceleration Notice on the Covered Bond Guarantor and the Issuer, the Adjusted Aggregate Mortgage Loan Amount (as at the last day of the immediately preceding Collection Period) will be at least equal to the Australian Dollar Equivalent of the aggregate Principal Amount Outstanding (as at the last day of the immediately preceding Collection Period) of the Covered Bonds as calculated on the relevant Determination Date.

If the Adjusted Aggregate Mortgage Loan Amount (as at the last day of the immediately preceding Collection Period) is less than the Australian Dollar Equivalent of the aggregate Principal Amount Outstanding (as at the last day of the immediately preceding Collection Period) of all Covered Bonds on two consecutive Determination Dates, the Bond Trustee must serve an Asset Coverage Test Breach Notice on the Covered Bond Guarantor (subject to the Bond Trustee having actual knowledge or express notice of the non-satisfaction of the Asset Coverage Test).  The Bond Trustee will be deemed to revoke an Asset Coverage Test Breach Notice if, on any Determination Date falling on or prior to the third consecutive Determination Date, the Asset Coverage Test is subsequently satisfied and neither a Notice to Pay nor a Covered Bond Guarantee Acceleration Notice has been served.  If the Asset Coverage Test Breach Notice is not revoked, as described above, an Issuer Event of Default will occur.

Amortisation Test

In addition, on each Determination Date following service of a Notice to Pay on the Covered Bond Guarantor (but prior to service of a Covered Bond Guarantee Acceleration Notice on the Covered Bond Guarantor and the Issuer) and, for so long as any Covered Bonds remain outstanding, the Trust Manager must ensure that the Amortisation Test Aggregate Mortgage Loan Amount, as calculated on such Determination Date, will be at least equal to the Australian Dollar Equivalent of the aggregate Principal Amount Outstanding (as at the last day of the immediately preceding Collection Period) of the Covered Bonds on such Determination Date.  The Trust Manager must immediately notify the Covered Bond Guarantor, the Security Trustee and (for so long as Covered Bonds are outstanding) the Bond Trustee of any breach of the Amortisation Test and the Bond Trustee must serve an Amortisation Test Breach Notice on the Issuer and the Covered Bond Guarantor advising that the Amortisation Test has been breached. Following the service of a Notice to Pay on the Covered Bond Guarantor and an Amortisation Test Breach Notice on the Issuer and the Covered Bond Guarantor (subject to no Covered Bond Guarantor Event of Default having occurred), all Series of Covered Bonds will convert to Pass-Through Covered Bonds, such that payment of the unpaid amount in respect of all Series of Covered Bonds by the Covered Bond Guarantor under the Covered Bond Guarantee will be deferred until the Extended Due for Payment Date.

Legislated Minimum Over-Collateralisation

In addition to the Asset Coverage Test and the Amortisation Test, the Programme benefits from the Issuer's obligation to comply with the minimum over-collateralisation requirements set out in the Australian Banking Act (the Legislated Collateralisation Test), as described in section "Description of the Covered Bond Provisions of the Australian Banking Act" of this Prospectus. As the Legislative Collateralisation Test is a minimum requirement, the Issuer expects that its obligation in respect of this legal requirement will be satisfied in all circumstances in which the Asset Coverage Test or the Amortisation Test, as applicable, is satisfied.

Reserve Fund

The Covered Bond Guarantor will be required on the first Issue Date or the first Distribution Date to deposit into the GIC Account (with a corresponding credit to the Reserve Ledger) any Available Income Amount or the proceeds of the issue of Intercompany Notes or the Demand Note (or the proceeds of any Increase in the Demand Note) up to an amount equal to the Reserve Fund Required Amount. On each subsequent Issue Date or Distribution Date, the Covered Bond Guarantor may be required to make further deposits into the GIC Account (with a corresponding credit to the Reserve Ledger) of any Available Income Amount and/or (after the service of a Notice to Pay on the Covered Bond Guarantor but prior to the service of a Covered Bond Guarantee Acceleration Notice on the Covered Bond Guarantor and the Issuer) the Available Principal Amount, the proceeds of the issue of an Intercompany Note or Demand Note (or the proceeds of any Increase in the Demand Note) up to an amount equal to the Reserve Fund Required Amount. The Reserve Fund Required Amount on any day will depend on the credit rating and deposit rating of the Issuer. For so long as the Issuer's short-term unsecured, unsubordinated and unguaranteed debt obligations are rated at least F1 by Fitch or its long term, unsecured, unsubordinated and unguaranteed debt obligations are rated at least A by Fitch (the Fitch Specified Ratings) and the Issuer has a short-term deposit rating of at least P-1 by Moody's (the Moody's Specified Rating), the Reserve Fund Required Amount is nil (or such other amount as the Issuer notifies the Covered Bond Guarantor).

As at the date of this Prospectus, the Issuer does not have the Fitch Specified Ratings or the Moody's Specified Rating. Accordingly, the Issuer will be required to deposit and, for so long as the Issuer continues to not have the Fitch Specified Ratings and/or the Moody's Specified Rating, maintain the Reserve Fund Required Amount in the GIC Account.

Mortgage Sale Agreement

Under the terms of the Mortgage Sale Agreement, the Consideration payable to the Seller for the sale of Mortgage Loan Rights originated by the Seller to the Covered Bond Guarantor on any Closing Date will be a cash payment paid by the Covered Bond Guarantor to the Seller on the applicable Closing Date.  The Seller will, subject to the satisfaction of certain conditions, be permitted to sell Eligible Mortgage Loans and the Collateral Security to the Covered Bond Guarantor from time to time.

Servicing Deed

In its capacity as Servicer, BOQ has entered into the Servicing Deed with the Covered Bond Guarantor and the Security Trustee, pursuant to which the Servicer has agreed to provide administrative services in respect of, amongst others, the Mortgage Loan Rights sold by BOQ (in its capacity as Seller) to the Covered Bond Guarantor.

Dual recourse; Excess Proceeds to be paid to Covered Bond Guarantor

Following the occurrence of an Issuer Event of Default that is continuing, the Bond Trustee may serve an Issuer Acceleration Notice on the Issuer and a Notice to Pay on the Covered Bond Guarantor.

Following service of an Issuer Acceleration Notice and a Notice to Pay, any moneys received by the Bond Trustee from the Issuer (or any administrator, receiver, receiver and manager, liquidator, statutory manager or other similar official appointed in relation to the Issuer) will be paid by the Bond Trustee to the Covered Bond Guarantor and will be used by the Covered Bond Guarantor in the same manner as all other moneys available to it from time to time.

Following service of a Notice to Pay on the Covered Bond Guarantor, the Covered Bond Guarantor will, subject to the terms of the Bond Trust Deed, pay or procure to be paid on each Scheduled Payment Date to or to the order of the Bond Trustee (for the benefit of the Covered Bondholders) an amount equal to those Guaranteed Amounts which have become Due for Payment, but which have not been paid by the Issuer.

Payments by the Covered Bond Guarantor under the Covered Bond Guarantee will be made in accordance with the Guarantee Priority of Payments.

For a more detailed description of the transactions summarised above relating to the Covered Bonds see, amongst other relevant sections of this Prospectus, "Principal Characteristics of the Programme", "General Description of the Programme", "Risk Factors", "Overview of the Principal Documents", "Credit Structure", "Cashflows", "The Mortgage Loan Rights" and "Terms and Conditions of the Covered Bonds", below.

General Description of the Programme

 

The following overview does not purport to be complete and is taken from, and is qualified in its entirety by, the remainder of this Prospectus and, in relation to the terms and conditions of any particular Tranche of Covered Bonds, the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement).  Words and expressions defined elsewhere in this Prospectus will have the same meanings in this overview.  A glossary of certain defined terms is contained at the end of this Prospectus.

Issuer:	Bank of Queensland Limited ABN 32 009 656 740, is a public limited company incorporated in the Commonwealth of Australia and its registered office is Level 6, 100 Skyring Terrace, Newstead, Queensland 4006, Australia (BOQ). For further information about the Issuer, please see the section of this Prospectus entitled "Bank of Queensland Limited" below.
Issuer's Legal Entity Identifier:	549300WFIN7T02UKDG08
Covered Bond Guarantor:	Perpetual Corporate Trust Limited ABN 99 000 341 533, incorporated with limited liability in the Commonwealth of Australia and having its registered office at Level 18, 123 Pitt Street, Sydney, New South Wales 2000 Australia, as trustee of the BOQ Covered Bond Trust (the Trust).
	In its capacity as trustee of the Trust, the Covered Bond Guarantor's principal business is to acquire, inter alia, Mortgage Loan Rights from the Seller pursuant to the terms of the Mortgage Sale Agreement and to guarantee certain payments in respect of the Covered Bonds.  The Covered Bond Guarantor will hold the Mortgage Loan Rights forming part of the Assets of the Trust and the other Charged Property in accordance with the terms of the Programme Documents.
	The Covered Bond Guarantor has provided a guarantee covering all Guaranteed Amounts when the same become Due for Payment, but only following service on the Issuer of an Issuer Acceleration Notice and service on the Covered Bond Guarantor of a Notice to Pay or, if earlier, the service on the Issuer and the Covered Bond Guarantor of a Covered Bond Guarantee Acceleration Notice.  The obligations of the Covered Bond Guarantor under the Covered Bond Guarantee and the other Programme Documents to which it is a party are secured by the Charged Property from time to time of the Covered Bond Guarantor.
	The liability of the Covered Bond Guarantor to make payments under the Programme Documents (including under the Covered Bond Guarantee) is limited to its right of indemnity from the Assets of the Trust. Except in the case of, and to the extent that the Covered Bond Guarantor's right of indemnification against the Assets of the Trust is reduced as a result of fraud, negligence or wilful default, no rights may be enforced against the personal assets of the Covered Bond Guarantor by any person and no proceedings may be brought against the Covered Bond Guarantor except to the extent of the Covered Bond Guarantor's right of indemnity and reimbursement out of the Assets of the Trust. Other than in the exception previously mentioned, the personal assets of the Covered Bond Guarantor are not available to meet payments under the Covered Bond Guarantee.
The Trust:	The Trust is established for purposes relating only to the Covered Bonds, including (without limitation) the acquisition, management and sale of, amongst other things, Mortgage Loan Rights, the borrowing of moneys to fund the acquisition of such assets, the hedging of risks associated with such assets and such funding, the acquisition, management and sale of Substitution Assets and Authorised Investments, the giving of guarantees, the granting of security and any purpose which is ancillary or incidental to any of the foregoing.
Initial Capital Unitholder:	BOQ.
Initial Income Unitholder:	BOQ.
Trust Manager:	B.Q.L. Management Pty Ltd ABN 87 081 052 342, is a private limited company incorporated in the Commonwealth of Australia and its registered office is Level 6, 100 Skyring Terrace, Newstead, Queensland 4006, Australia (BQLM).
Seller:	The Seller under the Programme is BOQ, which is in the business, inter alia, of originating and acquiring residential mortgage loans and conducting other banking related activities.
Servicer:	Pursuant to the terms of the Servicing Deed, BOQ has been appointed to service the Mortgage Loan Rights sold to the Covered Bond Guarantor by the Seller.
Principal Paying Agent and Transfer Agent:	The Bank of New York Mellon, London Branch whose registered office is at 160 Queen Victoria Street, London, EC4V 4LA, United Kingdom, has been appointed pursuant to the Principal Agency Agreement as Principal Paying Agent and Transfer Agent.
Registrar:	The Bank of New York Mellon SA/NV, Luxembourg Branch whose registered office is at 2-4 Eugene Ruppert, Vertigo Building, Polaris L-2453 Luxembourg, has been appointed pursuant to the Registrar.
A$ Registrar:	Austraclear Services Limited ABN 28 003 284 419 who has an office at 20 Bridge Street, Sydney NSW 2000, Australia will be appointed pursuant to the A$ Registry Agreement as A$ Registrar.
Bond Trustee:	BNY Trust Company of Australia Limited ABN 49 050 294 052 whose registered office is at Level 2, 1 Bligh Street, Sydney, NSW, 2000, Australia, has been appointed to act as Bond Trustee on behalf of the Covered Bondholders and the Couponholders in respect of the Covered Bonds and holds the benefit of, inter alia, the covenant to pay and the Covered Bond Guarantee on behalf of the Covered Bondholders and the Couponholders pursuant to the Bond Trust Deed.
Security Trustee:	P.T. Limited ABN 67 004 454 666, whose registered office is at Level 18, 123 Pitt Street, Sydney, New South Wales 2000, Australia has been appointed to act as Security Trustee to hold the benefit of the Security granted by the Covered Bond Guarantor to the Security Trustee (for the Secured Creditors) pursuant to the Security Deed.
Cover Pool Monitor:	KPMG, whose registered office is at Riparian Plaza, 71 Eagle Street, Brisbane QLD 4000, Australia has been appointed as Cover Pool Monitor pursuant to the Cover Pool Monitor Agreement as an independent monitor to perform tests in respect of the Asset Coverage Test and Amortisation Test, to test compliance of the Assets forming part of the Trust with the requirements of the Australian Banking Act (including the Legislated Collateralisation Test) and to assess whether the Trust Manager is keeping an accurate register of the Assets forming part of the Trust.
Covered Bond Swap Providers:	Each entity which agrees to act as a swap provider to the Covered Bond Guarantor to hedge certain interest rate, currency and/or other risks in respect of amounts received by the Covered Bond Guarantor under the Mortgage Loans and Interest Rate Swaps and, in the case of a Non-Forward Starting Covered Bond Swap, amounts payable by the Covered Bond Guarantor under the Intercompany Notes (prior to the service of a Notice to Pay) and, in the case of a Non-Forward Starting Covered Bond Swap and Forward Starting Covered Bond Swap, under the Covered Bond Guarantee in respect of the Covered Bonds (after service of a Notice to Pay) by entering into one or more Covered Bond Swaps with the Covered Bond Guarantor and the Security Trustee under a Covered Bond Swap Agreement in respect of each relevant Series or Tranche of Covered Bonds (where applicable).
Interest Rate Swap Provider:	BOQ (in its capacity as the Interest Rate Swap Provider) has agreed to act as a swap provider to the Covered Bond Guarantor to hedge possible variances between (a) the rates of interest payable on the Mortgage Loans and on certain other Assets forming part of the Trust and (b) the interest basis payable by the Covered Bond Guarantor under the Covered Bond Swaps, the Intercompany Notes (or the Covered Bond Guarantee) and the Demand Note, by entering into the Interest Rate Swaps with the Covered Bond Guarantor, the Standby Swap Provider and the Security Trustee under the Interest Rate Swap Agreement.
Standby Swap Provider:	The entity which agrees to act as a standby swap provider to the Covered Bond Guarantor to, in certain circumstances, act in place of the Interest Rate Swap Provider, by entering into the Fixed Rate Swap with the Covered Bond Guarantor, the Interest Rate Swap Provider and the Security Trustee under the Interest Rate Swap Agreement.
Account Bank:	Macquarie Bank Limited ABN 46 008 583 542, whose registered office is at Level 6, 50 Martin Place Sydney, New South Wales 2000, Australia has been appointed as the initial Account Bank to the Covered Bond Guarantor pursuant to the terms of the Account Bank Agreement.
Programme Description:	Reg S Covered Bond Programme.
Arranger:	National Australia Bank Limited ABN 12 004 044 937 in respect of any issuance of Covered Bonds.
Dealers:	In respect of any issuance of Covered Bonds, Australia and New Zealand Banking Group Limited ABN 11 005 357 522, BNP Paribas, Commerzbank Aktiengesellschaft, ING Bank N.V., National Australia Bank Limited ABN 12 004 044 937, UBS AG London Branch and any other Dealer appointed from time to time in accordance with the Programme Agreement which appointment may be to a specific issue or on an ongoing basis.
Certain Restrictions:	Each issue of Covered Bonds denominated in a currency in respect of which particular laws, guidelines, regulations, restrictions or reporting requirements apply will only be issued in circumstances which comply with such laws, guidelines, regulations, restrictions or reporting requirements from time to time (see the section of this Prospectus entitled "Subscription and Sale and Transfer and Selling Restrictions" below).
Programme Size:	Up to AUD6,000,000,000 (or its equivalent in other currencies determined by reference to the spot rate for the sale of AUD dollars against the purchase of such currency in the London foreign exchange market quoted by any leading bank selected by the Issuer on the relevant date of agreement (or the preceding day on which commercial banks and foreign exchange markets are open for business in London) between the Issuer and the relevant Dealer(s) for issue of the Covered Bonds) outstanding at any time.  The Issuer may increase the amount of the Programme in accordance with the terms of the Programme Agreement.
Distribution:	Covered Bonds may be distributed under the Programme by way of private or public placement and in each case on a syndicated or non‑syndicated basis, subject to the restrictions set forth in the section of this Prospectus entitled "Subscription and Sale and Transfer and Selling Restrictions" below.
Specified Currencies:	Subject to any applicable legal or regulatory restrictions, such currency or currencies as may be agreed from time to time by the Issuer, the relevant Dealer(s), the Principal Paying Agent and the Bond Trustee (as set out in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement)).
Maturities:	Such maturities as may be agreed between the Issuer and the relevant Dealer(s) and as indicated in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement), subject to such minimum or maximum maturities as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the Issuer or the relevant Specified Currency.
Issue Price:	Covered Bonds may be issued at par or at a premium or discount to par on a fully-paid basis, as set out in the relevant Final Terms.
Form of Covered Bonds:	The Covered Bonds will be issued in bearer or registered form as described in the section of this Prospectus entitled "Form of the Covered Bonds" below.  Registered Covered Bonds and A$ Registered Covered Bonds will not be exchangeable for Bearer Covered Bonds and vice versa.
	Interest on Covered Bonds in bearer form will only be payable outside the United States and its possessions.
	Covered Bonds may be Fixed Rate Covered Bonds or Floating Rate Covered Bonds, depending on the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement), and subject, in each case, to issuance of a Rating Affirmation Notice by the Issuer.
Fixed Rate Covered Bonds:	Fixed Rate Covered Bonds will bear interest at a fixed rate which will be payable on such date or dates as may be agreed between the Issuer and the relevant Dealer(s) and on redemption and will be calculated on the basis of such Day Count Fraction as may be agreed between the Issuer and the relevant Dealer(s) (as set out in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement)).
Floating Rate Covered Bonds:	Floating Rate Covered Bonds will bear interest at a rate determined:
	(i)         on the basis of a reference rate appearing on the agreed screen page of a commercial quotation service; or
	(ii)        on such other basis as may be agreed between the Issuer and the relevant Dealer(s),
	in each case as set out in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement).
	The margin (if any) relating to such floating rate will be agreed between the Issuer and the relevant Dealer(s) for each issue of Floating Rate Covered Bonds as set out in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement).
Other provisions in relation to Floating Rate Covered Bonds:	Floating Rate Covered Bonds may also have a maximum interest rate, a minimum interest rate or both (as indicated in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement)).  Interest on Floating Rate Covered Bonds in respect of each Interest Period, as agreed prior to issue by the Issuer and the relevant Dealer(s), will be payable on such Interest Payment Dates, and will be calculated on the basis of such Day Count Fraction, as may be agreed between the Issuer and the relevant Dealer(s), as set out in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement).
Redemption:	The Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement) for a Series of Covered Bonds will indicate either that the relevant Covered Bonds of such Series cannot be redeemed prior to their stated maturity (other than for taxation reasons or if it becomes unlawful for the Intercompany Notes and/or the Demand Note to remain outstanding or if a Covered Bond Guarantor Event of Default occurs) or that such Covered Bonds will be redeemable at the option of the Issuer upon giving notice to the Covered Bondholders, on a date or dates specified prior to such stated maturity and at a price or prices and on such other terms as may be agreed between the Issuer and the relevant Dealer(s) (as set out in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement)).
Extendable obligations under the Covered Bond Guarantee and Conditional Pass-Through Covered Bonds:	Prior to the Conversion Event Date: (i)        if the Issuer fails to pay, in full, the Final Redemption Amount for a Series of Covered Bonds on the Final Maturity Date for such Covered Bonds (or by the end of the applicable grace period) and, following the service of a Notice to Pay on the Covered Bond Guarantor by no later than the date falling one Business Day prior to the Extension Determination Date, the Covered Bond Guarantor fails to pay, in full, the Guaranteed Amount equal to the unpaid portion of such Final Redemption Amount by no later than the Extension Determination Date for such Covered Bonds in accordance with the terms of the Covered Bond Guarantee (for example because, following the service of a Notice to Pay on the Covered Bond Guarantor, there are insufficient moneys available to it to pay, in accordance with the Guarantee Priority of Payments, such Guaranteed Amounts in full), then the obligation of the Covered Bond Guarantor to pay the unpaid amount in respect of that Series of Covered Bonds will be deferred (and a Covered Bond Guarantor Event of Default will not occur as a result of such failure) until the first Interest Payment Date thereafter on which sufficient moneys are available (after providing for liabilities ranking in priority thereto or pari passu and rateably therewith subject to and in accordance with the Guarantee Priority of Payments) to fund the payment of the balance of the Final Redemption Amount, or any part thereof, provided that such payment will not be deferred beyond the date which falls 31.5 years after the Final Maturity Date in relation to that Series of Covered Bonds (being the Extended Due for Payment Date in respect of that Series of Covered Bonds) when the unpaid portion of such Final Redemption Amount (together with accrued interest) will be due and payable; and (ii)       if an Issuer Event of Default has occurred (x) in accordance with Condition 9(a) (other than in accordance with Condition 9(a)(i) as a result of a failure to pay the Final Redemption Amount in respect of a Series of Covered Bonds) and the Bond Trustee has served a Notice to Pay on the Covered Bond Guarantor or (y) in accordance with Condition 9(a)(i) as a result of a failure to pay the Final Redemption Amount in respect of a Series of Covered Bonds and such Series of Covered Bonds has been redeemed in full and at such time there are no Pass-Through Covered Bonds then outstanding, then payment of the Final Redemption Amount in respect of the then Earliest Maturing Covered Bonds by the Covered Bond Guarantor under the Covered Bond Guarantee will be deferred (and such Earliest Maturing Covered Bonds will convert to Pass-Through Covered Bonds) until the first Interest Payment Date thereafter on which sufficient moneys are available (after providing for liabilities ranking in priority thereto or pari passu and rateably therewith subject to and in accordance with the Guarantee Priority of Payments) to fund the payment of such amount, or any part thereof, provided that such payment will not be deferred beyond the date which falls 31.5 years after the Conversion of that Series of Covered Bonds (being the Extended Due for Payment Date in respect of that Series of Covered Bonds) when the unpaid portion of such Final Redemption Amount (together with accrued interest) will be due and payable.  All Series of Covered Bonds will convert to Pass-Through Covered Bonds immediately upon the Conversion Event Date, being the date on which an Amortisation Test Breach Notice is served on the Covered Bond Guarantor and the Issuer, following the service of a Notice to Pay on the Covered Bond Guarantor. If the Conversion Event Date occurs (subject as provided below), payment of the unpaid amount in respect of all Series of Covered Bonds by the Covered Bond Guarantor under the Covered Bond Guarantee will be deferred until, in respect of a Series of Covered Bonds, the earlier of (a) the date which falls 31.5 years after the Final Maturity Date in relation to that Series of Covered Bonds; (b) the date which falls 31.5 years after the Conversion of that Series of Covered Bonds and (c) the date which falls 31.5 years after the Conversion Event Date (such applicable date, being the Extended Due for Payment Date in respect of that Series of Covered Bonds). The Covered Bond Guarantor (at the direction of the Trust Manager) must on the next, and each following Interest Payment Date for each Series of Covered Bonds, apply the moneys (if any) available for that Series of Covered Bonds on a Distribution Date (after paying or providing for payment of higher ranking or pari passu amounts in accordance with the Guarantee Priority of Payments) towards payment, in whole or part, of the Final Redemption Amount of that Series of Covered Bonds (and to such extent, the Final Redemption Amount will, for the purpose of the Guarantee Priority of Payments and all other purposes, be due) on such Interest Payment Date. In each of the circumstances above, interest will accrue on any unpaid portion of a Series of Covered Bonds during any such extended period and will be due and payable on each Interest Payment Date up to, and including, the Extended Due for Payment Date in respect of that Series of Covered Bonds in accordance with Condition 4.
Denomination of Covered Bonds:	Covered Bonds will be issued in denominations of €100,000 or such other denominations as may be agreed between the Issuer and the relevant Dealer(s) and as indicated in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement) provided that the minimum denomination of each Covered Bond will be €100,000 (or, if the Covered Bonds are denominated in a currency other than euro, at least the equivalent amount in such currency) or such other higher amount as may be required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Specified Currency and, in the case of any Covered Bonds offered in Australia, the minimum subscription amount in respect of an issue or transfer is A$500,000 (disregarding any amount lent by the offeror, the Issuer or any associated person of the offeror or Issuer).
Taxation:	All payments in respect of the Covered Bonds will be made without deduction or withholding for or on account of any taxes, subject as provided in Condition 7.  If any such deduction or withholding is made by the Issuer, the Issuer will, only in the limited circumstances provided in Condition 7 and only where the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement) indicate that the tax gross up by the Issuer in accordance with Condition 7 is applicable, pay additional amounts in respect of the amounts so deducted or withheld. If any payments made by the Covered Bond Guarantor under the Covered Bond Guarantee are or become subject to any such withholding or deduction, the Covered Bond Guarantor will not be obliged to pay any additional amount as a consequence under Condition 7. The Guaranteed Amounts payable by the Covered Bond Guarantor under the Covered Bond Guarantee do not include any additional amounts the Issuer would be obliged to pay as a result of any deduction or withholding in accordance with Condition 7. In no event will the Issuer or Covered Bond Guarantor be required to pay any additional amounts in respect of the Covered Bonds for, or on account of, any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 (the Code) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder, any official interpretations thereof, or any law implementing an intergovernmental approach thereto. For a further discussion of any withholding tax obligations see the section "Taxation" of this Prospectus.
Cross Default:	If an Issuer Acceleration Notice is served, then the Covered Bonds of all Series outstanding will be accelerated against the Issuer.
	If a Covered Bond Guarantee Acceleration Notice is served, then the obligation of the Covered Bond Guarantor to pay the Guaranteed Amounts in respect of all Series of Covered Bonds outstanding will be accelerated.
Status of the Covered Bonds:	The Covered Bonds will constitute direct, unsecured, unsubordinated and unconditional obligations of the Issuer and will rank pari passu without any preference or priority among themselves and (save for any applicable statutory provisions) at least equally with all other present and future unsecured and unsubordinated obligations of the Issuer, from time to time outstanding.  The Covered Bonds do not constitute deposits or deposit liabilities of BOQ, are not protected accounts for the purposes of the depositor protection provisions in Division 2 of Part II of the Australian Banking Act (or of the Financial Claims Scheme established under Division 2AA of Part II of the Australian Banking Act (the Financial Claims Scheme)) and are not guaranteed or insured by any government, government agency or compensation scheme of the Commonwealth of Australia or any other jurisdiction or by any other party.
Covered Bond Guarantee:	Payment of Guaranteed Amounts in respect of the Covered Bonds when Due for Payment will be irrevocably guaranteed by the Covered Bond Guarantor under the Covered Bond Guarantee.  The Covered Bond Guarantor will be under no obligation to make payment in respect of the Guaranteed Amounts when Due for Payment unless (a) an Issuer Event of Default has occurred and is continuing, and a Notice to Pay is served on the Covered Bond Guarantor and an Issuer Acceleration Notice has been served on the Issuer; or (b) a Covered Bond Guarantor Event of Default has occurred and is continuing and a Covered Bond Guarantee Acceleration Notice is served on the Covered Bond Guarantor and the Issuer.  The obligations of the Covered Bond Guarantor under the Covered Bond Guarantee will accelerate against the Covered Bond Guarantor, and the Guaranteed Amounts will become immediately due and payable, upon the service of a Covered Bond Guarantee Acceleration Notice.  The obligations of the Covered Bond Guarantor under the Covered Bond Guarantee constitute direct, absolute and (following service of an Issuer Acceleration Notice and Notice to Pay or a Covered Bond Guarantee Acceleration Notice) unconditional obligations of the Covered Bond Guarantor secured against the Mortgage Loan Rights and other Assets from time to time forming part of the Trust and limited in recourse against the Covered Bond Guarantor.
	The liability of the Covered Bond Guarantor to make payments under the Programme Documents (including under the Covered Bond Guarantee) is limited to its right of indemnity from the Assets of the Trust. Except and to the extent that the Covered Bond Guarantor's right of indemnification against the Assets of the Trust is reduced as a result of the Covered Bond Guarantor's fraud, negligence or wilful default, no rights may be enforced against the personal assets of the Covered Bond Guarantor by any person and no proceedings may be brought against the Covered Bond Guarantor except to the extent of the Covered Bond Guarantor's right of indemnity and reimbursement out of the Assets of the Trust. Other than in the exception previously mentioned, the personal assets of the Covered Bond Guarantor are not available to meet payments under the Covered Bond Guarantee.
Ratings:	Covered Bonds to be issued under the Programme will have the credit ratings specified in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement) on issuance.
	In general, European regulated investors are restricted under the CRA Regulation from using credit ratings for regulatory purposes in the EEA, unless such ratings are issued by a credit rating agency established in the EEA and registered under the CRA Regulation (and such registration has not been withdrawn or suspended, subject to transitional provisions that apply in certain circumstances whilst the registration application is pending).  Such general restriction will also apply in the case of credit ratings issued by third country non-EEA credit rating agencies, unless the relevant credit ratings are endorsed by an EEA-registered credit rating agency or the relevant third country rating agency is certified in accordance with the CRA Regulation (and such endorsement action or certification, as the case may be, has not been withdrawn or suspended). Investors regulated in the UK are subject to similar restrictions under the UK CRA Regulation. As such, UK regulated investors are required to use for UK regulatory purposes ratings issued by a credit rating agency established in the UK and registered under the UK CRA Regulation. In the case of ratings issued by third country non-UK credit rating agencies, third country credit ratings can either be: (a) endorsed by a UK registered credit rating agency; or (b) issued by a third country credit rating agency that is certified in accordance with the UK CRA Regulation. Note this is subject, in each case, to (a) the relevant UK registration, certification or endorsement, as the case may be, not having been withdrawn or suspended, and (b) transitional provisions that apply in certain circumstances. If the status of the rating agency rating the Covered Bonds changes for the purposes of the CRA Regulation or the UK CRA Regulation, relevant regulated investors may no longer be able to use the rating for regulatory purposes in the EEA or the UK, as applicable, and the Covered Bonds may have a different regulatory treatment, which may impact the value of the Covered Bonds and their liquidity in the secondary market.
	Ratings are not a recommendation or suggestion, directly or indirectly, to any investor or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security for a particular investor (including without limitation, any accounting and/or regulatory treatment), or the tax-exempt nature or taxability of payments made in respect of any investment, loan or security. A credit rating may be subject to revision, suspension or withdrawal at any time by the assigning Rating Agency. The Rating Agencies are not advisors, and nor do the Rating Agencies provide investors or any other party any financial advice, or any legal, auditing, accounting, appraisal, valuation or actuarial services.  A rating should not be viewed as a replacement for such advice or services.
Listing and admission to trading:	Application has been made by the Issuer to the FCA for Covered Bonds issued under the Programme to be admitted to, during the period of 12 months from the date of this Prospectus, the Official List and to the London Stock Exchange for such Covered Bonds to be admitted to trading on the main market of the London Stock Exchange. The Applicable Pricing Supplement, in the case of Exempt Covered Bonds, will state whether or not the relevant Exempt Covered Bonds are to be listed and/or admitted to trading and, if so, on which stock exchanges and/or markets.
Governing Law:	The Programme Agreement and any non-contractual obligations arising out of or in connection with it are governed by, and will be construed in accordance with, English law.
	The Establishment Deed, the Mortgage Sale Agreement, the Servicing Deed, the Intercompany Note Subscription Agreement, the Demand Note Subscription Agreement, the Management Agreement, the Security Deed, the Definitions Schedule, the Cover Pool Monitor Agreement, the Account Bank Agreement, the Interest Rate Swap Agreement, each Covered Bond Swap Agreement and the A$ Registry Agreement are governed by, and will be construed in accordance with, the laws applying in the State of New South Wales, Australia.
	The Bond Trust Deed (including the Covered Bond Guarantee), the Principal Agency Agreement, the Covered Bonds (other than any A$ Registered Covered Bonds), and the Coupons and any non-contractual obligations arising out of or in connection with them are governed by, and will be construed in accordance with, English law unless specifically stated to the contrary.  In this regard, the covenant to pay made by the Issuer to the Bond Trustee in respect of the A$ Registered Covered Bonds in the Bond Trust Deed, the provisions relating to the maintenance of the Register in respect of the A$ Registered Covered Bonds in the Bond Trust Deed and the provisions relating to the limitation of liability of the Covered Bond Guarantor in the Bond Trust Deed, the Principal Agency Agreement and the Covered Bonds are governed by, and will be construed in accordance with, the laws applying in the State of New South Wales, Australia.
Selling Restrictions:	There are restrictions on the offer, sale and transfer of any Series or Tranche of Covered Bonds.  See the section of this Prospectus entitled "Subscription and Sale and Transfer and Selling Restrictions" below.
Risk Factors:	There are certain risks related to the issue of Covered Bonds under the Programme which investors should ensure they fully understand, a summary of which are set out in the section of this Prospectus entitled "Risk Factors" and include, inter alia, the risk of subsequent changes in the actual or perceived creditworthiness of the Issuer or the Covered Bond Guarantor (as applicable), which may adversely affect the market value of the Covered Bonds.  In addition, there are certain factors which are material for the purpose of assessing the market risks associated with Covered Bonds issued under the Programme which include, inter alia, risks related to the structure of a particular issue of Covered Bonds (including that there is limited recourse to the Covered Bond Guarantor), modifications and waivers of the terms and conditions of the Covered Bonds in certain circumstances without the consent of all of the Covered Bondholders, changes in laws, taxation laws or regulations which affect the Covered Bonds, risks related to secondary market trading of the Covered Bonds and exchange rate risks.  For further particulars, see the section of this Prospectus entitled "Risk Factors" below.

 

Documents Incorporated by Reference

 

The following documents which have previously been published, or are published simultaneously with this Prospectus, and have been filed with the Financial Conduct Authority and which are available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism shall be incorporated in, and to form part of, this Prospectus:

(a)        BOQ's audited annual consolidated and non-consolidated financial statements (including the directors' report, the auditor's report thereon and notes thereto) in respect of the year ended 31 August 2021 (as set out from page 11 to page 75 and from page 108 to page 194 of the 2021 Annual Report)            (https://www.boq.com.au/content/dam/boq/files/shareholder-centre/financial-results/2021/annual-report-2021.pdf);

(b)       BOQ's audited annual consolidated and non-consolidated financial statements (including the directors' report, the auditor's report thereon and notes thereto) in respect of the year ended 31 August 2022 (as set out from page 12 to page 70 and from page 106 to page 188 of the 2022 Annual Report)            (https://www.boq.com.au/content/dam/boq/files/shareholder-centre/financial-results/2022/annual-report-2022.pdf);

(c)        BOQ's financial accounts for the half year ended 28 February 2022 (including the auditor's review report, the consolidated interim financial statements of BOQ in respect of the half year ended 28 February 2022 and notes thereon) as set out from page 39 to page 65 of the 2022 Half Year Report (https://www.boq.com.au/content/dam/boq/files/shareholder-centre/financial-information/boq-interim-report-1h22-report-final.pdf);

(d)        BOQ's financial accounts for the half year ended 28 February 2023 (including the auditor's review report, the consolidated interim financial statements of BOQ in respect of the half year ended 28 February 2023 and notes thereon) as set out from page 33 to page 59 of the 2023 Half Year Report (https://www.boq.com.au/content/dam/boq/files/shareholder-centre/financial-information/boq-interim-report-1h23-report-final.pdf);

(e)        the audited financial statements of the Trust (including the auditor's report and the notes thereto) in respect of the year ended 31 August 2021 (https://www.boq.com.au/content/dam/boq/files/shareholder-centre/debt-investor-information/BOQ_Covered_Bond_Trust_Accounts_2021.pdf);

(f)        the audited financial statements of the Trust (including the auditor's report and the notes thereto) in respect of the year ended 31 August 2022 (https://www.boq.com.au/content/dam/boq/files/shareholder-centre/debt-investor-information/boq-covered-bond-trust-accounts-2022.PDF);

(g)        the cover pool information as set out on pages 3 to 6 (inclusive) of the BOQ Residential Covered Bond Trust - Monthly Investor Report for the Collection Period ended 31 March 2023 (https://www.boq.com.au/content/dam/boq/files/shareholder-centre/debt-investor-information/boq-covered-bond-trust-investor-report-20230331.pdf); and

(h)        the Terms and Conditions of the Covered Bonds contained in the Prospectuses dated 10 May 2017 on pages 111 to 161 (inclusive) (https://www.boq.com.au/content/dam/boq/files/shareholder-centre/debt-investor-information/covered-bond-prospectus-may-2017.pdf), dated 21 December 2017 on pages 118 to 168 (inclusive) (https://www.boq.com.au/content/dam/boq/files/shareholder-centre/debt-investor-information/covered-bond-prospectus-dec-2017.pdf), dated 13 December 2018 on pages 127 to 177 (inclusive) (https://www.boq.com.au/content/dam/boq/files/shareholder-centre/debt-investor-information/covered-bond-prospectus-december-2018.pdf), dated 15 April 2020 on pages 126 to 180 (inclusive) (https://www.boq.com.au/content/dam/boq/files/shareholder-centre/debt-investor-information/boq-cb-programme-update-2020.pdf), dated 20 April 2021 on pages 132 to 188 (inclusive) (https://www.boq.com.au/content/dam/boq/files/shareholder-centre/debt-investor-information/BOQ-CB-Prospectus-Programme-Update-2021.pdf) and dated 20 April 2022 on pages 138 to 193 (inclusive) (https://www.boq.com.au/content/dam/boq/files/shareholder-centre/debt-investor-information/boq-cb-programme-2022-update-base-prospectus.pdf), as prepared by the Issuer in connection with the Programme.

Any documents themselves incorporated by reference in the documents incorporated by reference in this Prospectus will not form part of this Prospectus.

The documents to be incorporated by reference herein listed in paragraphs (a) to (h) above can be viewed online at https://www.boq.com.au/Shareholder-centre/debt-investor-information/covered-bonds.

Any non-incorporated parts of a document referred to herein are either (i) not considered by the Issuer to be relevant for prospective investors in the Covered Bonds to be issued under the Programme or (ii) covered elsewhere in the Prospectus.

Following the publication of this Prospectus a supplement may be prepared by the Issuer and approved by the FCA in accordance with Article 23 of the Prospectus Regulation and Article 23 of the UK Prospectus Regulation. Statements contained in any such supplement (or contained in any document incorporated by reference therein) shall, to the extent applicable (whether expressly, by implication or otherwise), be deemed to modify or supersede statements contained in this Prospectus or in a document which is incorporated by reference in this Prospectus. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this Prospectus.

The Issuer will, in the event of any significant new factor, material mistake or inaccuracy relating to information included in this Prospectus which is capable of affecting the assessment of any Covered Bond, prepare a supplement to this Prospectus or publish a new Prospectus for use in connection with any subsequent issue of Covered Bonds.

 

Form of the Covered Bonds

The Covered Bonds of each Series will be in either bearer form, with or without interest coupons and/or talons attached, or registered form, without interest coupons and/or talons attached.  All Covered Bonds issued under the Programme will be issued outside the United States to persons other than U.S. persons in reliance on Regulation S.

Bearer Covered Bonds

Each Tranche of Bearer Covered Bonds will be initially issued in the form of a temporary global covered bond without interest coupons attached (a Temporary Global Covered Bond) which will be delivered on or prior to the issue date of the relevant Tranche to a common depositary (the Common Depositary) for Euroclear Bank SA/NV (Euroclear) and Clearstream Banking, S.A. (Clearstream, Luxembourg).

Bearer Covered Bonds will only be delivered outside the United States and its possessions.

Whilst any Bearer Covered Bond is represented by a Temporary Global Covered Bond, payments of principal, interest (if any) and any other amount payable in respect of the Bearer Covered Bonds due prior to the Exchange Date (as defined below) will be made (against presentation of the Temporary Global Covered Bond) only outside the United States and its possessions and to the extent that certification (in a form to be provided by Euroclear and/or Clearstream, Luxembourg) to the effect that the beneficial owners of interests in such Bearer Covered Bond are not U.S. persons or persons who have purchased for resale to any U.S. person, as required by U.S. Treasury regulations, has been received by Euroclear and/or Clearstream, Luxembourg and Euroclear and/or Clearstream, Luxembourg, as applicable, has given a like certification (based on the certifications it has received) to the Principal Paying Agent.

On and after the date (the Exchange Date) which is 40 days after a Temporary Global Covered Bond is issued, interests in such Temporary Global Covered Bond will be exchangeable (free of charge) in whole or in part for, as specified in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement), either (a) interests in a permanent global covered bond without interest coupons attached (a Permanent Global Covered Bond and, together with the Temporary Global Covered Bonds, the Bearer Global Covered Bonds and each a Bearer Global Covered Bond) of the same Series or (b) security printed Bearer Definitive Covered Bonds of the same Series with, where applicable, interest coupons and/or talons attached (on the basis that all the appropriate details have been included on the face of such Bearer Definitive Covered Bonds and, where applicable, interest coupons and/or talons and the relevant information supplementing, replacing or modifying the Conditions appearing in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement) has been endorsed or attached to such Bearer Definitive Covered Bonds), in each case against certification of beneficial ownership as described above unless such certification has already been given and upon notice being given by a relevant Clearing System acting on the instruction of any holder of an interest in the Temporary Global Covered Bond and subject, in the case of Bearer Definitive Covered Bonds, to such notice to persons as specified in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement).  Purchasers in the United States and certain U.S. persons will not be able to receive Bearer Definitive Covered Bonds or interests in the Permanent Global Covered Bond.  The holder of a Temporary Global Covered Bond will not be entitled to collect any payment of interest, principal or other amount due on or after the Exchange Date unless, upon due certification, exchange of the Temporary Global Covered Bond for an interest in a Permanent Global Covered Bond or for Bearer Definitive Covered Bonds is improperly withheld or refused.  Bearer Covered Bonds will be subject to certain restrictions on transfer set forth therein or will bear a legend regarding such restrictions.

The option for an issue of Covered Bonds to be represented on issue by a Permanent Global Covered Bond exchangeable for definitive Covered Bonds should not be expressed to be applicable in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement) if the Covered Bonds are issued with a minimum Specified Denomination such as €100,000 (or its equivalent in another currency) plus one or more higher integral multiples of another smaller amount such as €1,000 (or its equivalent in another currency).

Payments of principal, interest (if any) or any other amounts on a Permanent Global Covered Bond will be made outside the United States and its possessions and through Euroclear and/or Clearstream, Luxembourg against presentation or surrender (as the case may be) of the Permanent Global Covered Bond without any requirement for certification.

Interests in a Permanent Global Covered Bond will be exchanged (free of charge) by the Issuer, in whole but not in part only, at the option of the holder of such Permanent Global Covered Bond, for Definitive Covered Bonds and/or (in the case of a Series comprising both Bearer Covered Bonds and Registered Covered Bonds and if so specified in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement)) Registered Covered Bonds: (a) upon not less than 60 days' written notice being given to the Principal Paying Agent by Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in this Permanent Bearer Global Covered Bond); or (b) upon the occurrence of an Exchange Event. An Exchange Event means the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of fourteen days (other than by reason of holiday, whether statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and no successor clearing system is available.

The Issuer will promptly give notice to Covered Bondholders of each Series of Permanent Global Covered Bond in accordance with Condition 13 if an Exchange Event occurs.  In the event of the occurrence of an Exchange Event, Euroclear, Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Global Covered Bond) or the Bond Trustee may give notice to the Principal Paying Agent requesting exchange.  Any such exchange must occur not later than 45 days after the date of receipt of the first relevant notice by the Principal Paying Agent.

Bearer Global Covered Bonds, Bearer Definitive Covered Bonds and any Coupons or Talons attached thereto will be issued pursuant to the Principal Agency Agreement.

The following legend will appear on all Bearer Covered Bonds (other than Temporary Global Covered Bonds) and on all talons and interest coupons relating to such Bearer Covered Bonds where TEFRA D is specified in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement):

"ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE."

The sections referred to provide that U.S. persons (as defined under the U.S. Internal Revenue Code of 1986), with certain exceptions, will not be entitled to deduct any loss on Bearer Covered Bonds, talons or interest coupons and will not be entitled to capital gains treatment of any gain on any redemption, payment of principal, sale or other disposition in respect of such Bearer Covered Bonds, talons or interest coupons.

Covered Bonds which are represented by a Bearer Global Covered Bond will only be transferable in accordance with the rules and procedures for the time being of Euroclear or Clearstream, Luxembourg, as the case may be.

Registered Covered Bonds

The Registered Covered Bonds of each Tranche offered and sold in reliance on Regulation S will initially be represented by a global covered bond in registered form (a Registered Global Covered Bond).  Prior to expiry of the Distribution Compliance Period (as defined in Regulation S) applicable to each Tranche of Covered Bonds, beneficial interests in a Registered Global Covered Bond may not be offered or sold to, or for the account or benefit of, a U.S. person and may not be held otherwise than through Euroclear or Clearstream, Luxembourg, and such Registered Global Covered Bond will bear a legend regarding such restrictions on transfer (see "Subscription and Sale and Transfer and Selling Restrictions").

Registered Global Covered Bonds will be deposited with the Common Depositary for Euroclear and Clearstream, Luxembourg and registered in the name of a common nominee of, Euroclear and Clearstream, Luxembourg, as specified in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement).

Persons holding beneficial interests in Registered Global Covered Bonds will be entitled or required, as the case may be, under the circumstances described below, to receive physical delivery of Definitive Covered Bonds in fully registered form.

Payments of principal, interest and any other amount in respect of the Registered Global Covered Bonds will, in the absence of any provision to the contrary, be made to the person shown on the Register as the registered holder of the Registered Global Covered Bonds.  None of the Issuer, the Covered Bond Guarantor, the Bond Trustee or the Agents will have any responsibility or liability for any aspect of the records relating to or payments or deliveries made on account of beneficial ownership interests in the Registered Global Covered Bonds or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

Payments of principal, interest or any other amount in respect of the Registered Covered Bonds in definitive form will, in the absence of any provision to the contrary, be made to the persons shown on the Register on the relevant Record Date (as defined in Condition 5(d)) immediately preceding the due date for payment in the manner provided in that Condition.

Interests in a Registered Global Covered Bond will be exchangeable (free of charge), in whole but not in part, for Registered Definitive Covered Bonds without interest coupons or talons attached only upon the occurrence of an Exchange Event (as defined above). The Issuer will promptly give notice to Covered Bondholders of each Series of Registered Global Covered Bonds in accordance with Condition 13 if an Exchange Event occurs.  In the event of the occurrence of an Exchange Event, Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any registered holder of an interest in such Registered Global Covered Bond) or the Bond Trustee may give notice to the Registrar requesting exchange and, in the event of the occurrence of an Exchange Event as described in (ii) above, the Issuer may also give notice to the Registrar requesting exchange.  Any such exchange must occur not later than ten days after the date of receipt of the first relevant notice by the Registrar.

A$ Registered Covered Bonds

The A$ Registered Covered Bonds are issued in registered form by an entry in the A$ Register maintained by the A$ Registrar.

Entry of the name of the holder in the A$ Register in respect of an A$ Registered Covered Bond constitutes the obtaining or passing of title and is conclusive evidence that the person so entered is the registered holder of the A$ Registered Covered Bonds. A$ Registered Covered Bonds which are held in the Austraclear System will be registered in the name of Austraclear Ltd (ABN 94 002 060 773). No certificate or other evidence of title will be issued to holders of the A$ Registered Covered Bonds unless the Issuer determines that certificates should be available or it is required to do so pursuant to any applicable law or regulation.

Transfer of Interests

Interests in a Registered Global Covered Bond may, subject to compliance with all applicable restrictions, be transferred to a person who wishes to hold such interest in another Registered Global Covered Bond.  No beneficial owner of an interest in a Registered Global Covered Bond will be able to transfer such interest, except in accordance with the applicable procedures of Euroclear, Clearstream and Luxembourg, in each case to the extent applicable.

Transfers of interests in A$ Registered Covered Bonds held in the Austraclear System may be conducted only in accordance with the Austraclear Regulations and the A$ Registry Agreement.

Registered Covered Bonds and A$ Registered Covered Bonds are also subject to the restrictions on transfer set forth herein and will bear a legend regarding such restrictions (see "Subscription and Sale and Transfer and Selling Restrictions").

General

Pursuant to the Principal Agency Agreement (as defined under Conditions of the Covered Bonds), the Principal Paying Agent will arrange that, where a further Tranche of Covered Bonds is issued which is intended to form a single Series with an existing Tranche of Covered Bonds, the Covered Bonds of such further Tranche will be assigned a common code and ISIN which are different from the common code and ISIN assigned to Covered Bonds of any other Tranche of the same Series until at least the expiry of the Distribution Compliance Period applicable to the Covered Bonds of such Tranche.

Any reference herein to Euroclear, Clearstream, Luxembourg and/or the Austraclear System will, whenever the context so permits, be deemed to include a reference to any successor operator and/or successor clearing system and/or additional or alternative clearing system specified in the Applicable Final Terms (or, in the case of Exempt Covered Bonds, the Applicable Pricing Supplement) or as may otherwise be approved by the Issuer, the Principal Paying Agent and the Bond Trustee.

No Covered Bondholder or Couponholder will be entitled to institute proceedings directly against the Issuer or the Covered Bond Guarantor or to take any action with respect to the Bond Trust Deed or to directly enforce the provisions of any other Programme Document unless the Bond Trustee having become so bound to proceed, fails so to do within a reasonable period and the failure will be continuing.