PLANNED AMORTIZATION CLASS (P.A.C.)

(1) One class of C.M.O. that carries the most stable cash flows and the lowest prepayment risk of any class of C.M.O. Because of a stable cash flow , it is considered the least risky C.M.O. (2) A C.M.O. bond class that stipulates cash-flow contributions to a sinking fund. With the P.A.C., principal payments are directed to the sinking fund on a priority basis in accordance with a predetermined payment schedule, with prior claim to the cash flows before other C.M.O. classes. Similarly, cash flows received by the trust in excess of the sinking fund requirement are also allocated to other bond classes. The prepayment experience of the P.A.C. is therefore very stable over a wide range of prepayment experience.