In the case of the Floating Rate Classes other than Class FN, the constant value of LIBOR to
be used for these determinations is 1.30% in the case of the Group 4, 5 and 6 Securities and
1.14% in the case of the Group 10 Securities. No representation is made, however, about the
rate at which prepayments on the Mortgage Loans underlying any Group of Trust Assets actually
will occur or the level of LIBOR at any time after the date of this Supplement. See "Certain
Federal Income Tax Consequences" in the Base Offering Circular.
OID accruals on the Underlying Certificates will be computed using the same prepayment
assumption as set forth above.
The Regular Securities generally will be treated as "regular interests" in a REMIC for
domestic building and loan associations, "permitted assets" for financial asset securitization
investment trusts ("FASITs"), and "real estate assets" for real estate investment trusts
("REITs") as described in "Certain Federal Income Tax Consequences" in the Base Offering
Circular. Similarly, interest on the Regular Securities will be considered "interest on obliga-
tions secured by mortgages on real property" for REITs.
Residual Securities
The Class RR Securities will represent the beneficial ownership of the Residual Interest in
the Pooling REMIC and the beneficial ownership of the Residual Interest in the Issuing REMIC.
The Residual Securities, i.e., the Class RR Securities, generally will be treated as "residual
interests" in a REMIC for domestic building and loan associations and as "real estate assets" for
REITs, as described in "Certain Federal Income Tax Consequences" in the Base Offering
Circular, but will not be treated as debt for federal income tax purposes. Instead, the Holders of
the Residual Securities will be required to report, and will be taxed on, their pro rata shares of
the taxable income or loss of the Trust REMICs, and these requirements will continue until
there are no outstanding regular interests in the respective Trust REMICs. Thus, Residual
Holders will have taxable income attributable to the Residual Securities even though they will
not receive principal or interest distributions with respect to the Residual Securities, which
could result in a negative after-tax return for the Residual Holders. It is not expected that the
Pooling REMIC will have a substantial amount of taxable income or loss in any period.
However, even though the Holders of the Class RR Securities are not entitled to any stated
principal or interest payments on the Class RR Securities, the Issuing REMIC may have
substantial taxable income in certain periods, and offsetting tax losses may not occur until much
later periods. Accordingly, a Holder of the Class RR Securities may experience substantial
adverse tax timing consequences. Prospective investors are urged to consult their own tax
advisors and consider the after-tax effect of ownership of the Residual Securities and the
suitability of the Residual Securities to their investment objectives.
Prospective Holders of Residual Securities should be aware that, at issuance, based on the
expected prices of the Regular and Residual Securities and the prepayment assumption
described above, the residual interests represented by the Residual Securities will be treated as
"noneconomic residual interests" as that term is defined in Treasury regulations.
The proposed Treasury Regulations referred to in the Base Offering Circular relating to
transfers of noneconomic residual interests were finalized recently. See "Certain Federal
Income Tax Consequences Tax Treatment of Residual Securities Non-Recognition of
Certain Transfers for Federal Income Tax Purposes" in the Base Offering Circular. With certain
exceptions, the final regulations incorporate the safe harbor rules in the proposed regulations
(the "present value test") and in Revenue Procedure 2001-12 (the "asset test"). Among other
things, the final regulations modify the present value test to require use of the federal short
term rate for the month of transfer for purposes of the present value calculations. In addition, in
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