COLLEGE AND UNIVERSITY
FACILITY LOAN TRUST TWO
FINANCIAL STATEMENTS
AS OF NOVEMBER 30, 1996
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To State Street Bank and Trust Company (Owner Trustee):
We have audited the accompanying balance sheet of College and University
Facility Loan Trust Two (a Massachusetts business trust), including the schedule
of investments, as of November 30, 1996, and the related statements of
operations and cash flows for the year then ended, and the statements of changes
in net assets for each of the two years in the period then ended, and the
selected financial highlights for each of the periods presented. These financial
statements and the selected financial highlights are the responsibility of the
Owner Trustee. Our responsibility is to express an opinion on these financial
statements and the selected financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the selected
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the Loans and
Investments as of November 30, 1996 by correspondence with General Electric
Capital Corporation and Morgan Guaranty Trust Company, respectively. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the selected financial highlights
referred to above present fairly, in all material respects, the financial
position of College and University Facility Loan Trust Two as of November 30,
1996, and the results of its operations and its cash flows for the year then
ended, and the changes in its net assets for each of the two years in the period
then ended, and the selected financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
Boston, Massachusetts
December 27, 1996
<PAGE>
College and University
Facility Loan Trust Two
======================================================================
Financial Statements
November 30, 1996
<PAGE>
College and University
Facility Loan Trust Two
Balance Sheet
================================================================================
November 30, 1996
================================================================================
Assets
Investments, at amortized cost, net of allowance for
possible loan losses of $832,376 (Notes 1, 2, 6, 7
and 8 and Schedule of Investments) $210 423 951
Cash 113 919
Interest receivable 2 109 947
Deferred bond issuance costs (Note 2) 977 792
- --------------------------------------------------------------------------------
Total assets $213 625 609
================================================================================
Liabilities
Bonds payable, net of unamortized discount (Notes 3 and 8) $185 144 263
Interest payable (Note 3) 4 877 489
Dividends payable (Note 5) 672 570
Payable for redemption of Class A Preferred Certificates (Note 5) 1 224 622
Accrued expenses and other liabilities 260 639
- --------------------------------------------------------------------------------
Total liabilities 192 179 583
- --------------------------------------------------------------------------------
Net Assets
Class A Preferred Certificates, par value $1 - authorized
and outstanding - 8,629,880 certificates (preference as to
annual dividends of 13.65%, mandatory redemption and liquidation
at par value) (Note 5) 8 629 880
- --------------------------------------------------------------------------------
Class B Certificates, par value $1 - authorized, issued
and outstanding - 1,763,800 certificates (Note 5) 1 763 800
Accumulated deficit (Note 2) (1 504 946)
Paid-in capital (Note 2) 12 557 292
- --------------------------------------------------------------------------------
Total net assets applicable to Class B certificateholders 12 816 146
- --------------------------------------------------------------------------------
Total net assets $ 21 446 026
================================================================================
Net asset value per Class B certificate
(based on 1,763,800 certificates outstanding) $ 7.27
================================================================================
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
College and University
Facility Loan Trust Two
Statement of Operations
================================================================================
Year Ended November 30, 1996
================================================================================
Investment income:
Interest income (Note 2) $21 305 743
- --------------------------------------------------------------------------------
Expenses:
Interest expense (Notes 2 and 3) 17 733 795
Servicer fees (Note 4) 239 208
Trustee fees (Note 4) 68 724
Other trust and bond administration expenses 181 040
- --------------------------------------------------------------------------------
Total expenses 18 222 767
- --------------------------------------------------------------------------------
Net investment income 3 082 976
Provision for possible loan losses (Notes 2 and 6) 200 000
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2 882 976
Dividends to Class A Preferred Certificateholders 1 391 528
- --------------------------------------------------------------------------------
Net increase in net assets applicable to Class B
certificateholders resulting from operations $ 1 491 448
================================================================================
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
College and University
Facility Loan Trust Two
Statement of Cash Flows
================================================================================
Year Ended November 30, 1996
================================================================================
Cash flows from operating activities:
Interest received $ 10 315 681
Interest paid (10 468 393)
Operating expenses paid (770 235)
- --------------------------------------------------------------------------------
Net cash used for operating activities (922 947)
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Net decrease in funds held under investment agreements 1 487 852
Principal payments on Loans 27 317 819
- --------------------------------------------------------------------------------
Net cash provided by investing activities 28 805 671
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Principal repayments on Bonds (25 131 244)
Dividends on Class A Preferred certificates (1 479 807)
Redemptions of Class A Preferred certificates (1 293 474)
- --------------------------------------------------------------------------------
Net cash used for financing activities (27 904 525)
- --------------------------------------------------------------------------------
Net decrease in cash (21 801)
Cash, beginning of year 135 720
- --------------------------------------------------------------------------------
Cash, end of year $ 113 919
================================================================================
Reconciliation of net increase in net assets resulting from
operations to net cash used for operating activities:
Net increase in net assets resulting from operations $ 2 882 976
Provision for possible loan losses 200 000
Decrease in interest receivable 75 435
Decrease in accrued expenses and other liabilities (281 265)
Decrease in interest payable (502 625)
Amortization of original issue discount on Bonds 7 601 579
Amortization of purchase discount on Loans (11 065 495)
Amortization of deferred Bond issuance costs 166 448
- --------------------------------------------------------------------------------
Net cash used for operating activities $ (922 947)
================================================================================
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
College and University
Facility Loan Trust Two
Statements of Changes in Net Assets
(Note 2 (f))
================================================================================
Years Ended November 30, 1996 1995
================================================================================
From operations:
Net investment income $ 3 082 976 $ 3 285 412
Provision for possible loan losses (200 000) (430 000)
Dividends to certificateholders (Notes 2 and 5):
Class A Preferred Certificateholders
($.1365 per certificate annually)
From net investment income -- (760 849)
As tax return of capital (1 391 528) (809 291)
- --------------------------------------------------------------------------------
Net increase in net assets applicable to
Class B certificateholders resulting from
operations 1 491 448 1 285 272
- --------------------------------------------------------------------------------
Capital certificate transactions (Note 5):
Redemptions of Class A Preferred certificates
(1,904,305 and 1,323,566 certificates in 1996
and 1995, respectively) (1 904 305) (1 323 566)
- --------------------------------------------------------------------------------
Net decrease in net assets resulting from
capital certificate transactions (1 904 305) (1 323 566)
- --------------------------------------------------------------------------------
Net decrease in net assets (412 857) (38 294)
Net assets:
Beginning of year 21 858 883 21 897 177
- --------------------------------------------------------------------------------
End of year $21 446 026 $21 858 883
================================================================================
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
College and University
Facility Loan Trust Two
Selected Financial Highlights for Each
Class B Certificate Outstanding
Throughout the Periods Indicated
(Notes 1 and 5)
<TABLE>
<CAPTION>
========================================================================================================================
Years Ended November 30, 1996 1995 1994 1993 1992
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 6.42 $ 5.69 $ 4.77 $ 3.79 $ 2.90
- ------------------------------------------------------------------------------------------------------------------------
Net investment income 1.75 1.86 2.09 2.15 2.12
Provision for possible loan losses (.11) (.24) (.11) -- --
Dividends to Class A Preferred
Certificateholders:
From net investment income -- (.43) (.26) (1.17) (1.23)
As tax return of capital (.79) (.46) (.80) -- --
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 7.27 $ 6.42 $ 5.69 $ 4.77 $ 3.79
========================================================================================================================
Total investment return (a) N/A N/A N/A N/A N/A
Net assets applicable to
Class A Preferred
Certificates, end of year $ 8 629 880 $ 10 534 185 $ 11 857 751 $ 13 941 968 $ 15 435 727
Net assets applicable to Class
B Certificates, end of year $ 12 816 146 $ 11 324 698 $ 10 039 426 $ 8 406 774 $ 6 677 348
========================================================================================================================
Ratios and Supplemental Data:
Ratio of expenses to average
net assets applicable to
Class B Certificates 150.97%(b) 186.94%(b) 237.22%(b) 311.15%(b) 419.67%(b)
Ratio of net investment income
to average net assets applicable
to Class B Certificates 25.54% 30.76% 40.16% 50.29% 63.33%
Number of Class B Certificates
outstanding, end of year 1 763 800 1 763 800 1 763 800 1 763 800 1 763 800
</TABLE>
(a) The Trust's investments are recorded at amortized cost as discussed in Note
2. Accordingly, the financial statements do not reflect the market value of
such investments. For this reason, management believes that no meaningful
information can be provided regarding "Total Investment Return" and has not
included information under that heading.
(b) Excluding interest expense, the ratio of expenses to average net assets
applicable to Class B Certificates was 5.43%, 6.54%, 7.28%, 11.11%, and
15.74% in 1996, 1995, 1994, 1993, and 1992, respectively.
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
1. Organization College and University Facility Loan Trust Two (the
and Business Notes to Financial Statements on March 11, 1988 as a
business trust under the laws of the Commonwealth of
Massachusetts by a declaration of trust by State
Street Bank and Trust, formerly the Bank of Boston,
(the Owner Trustee), not in its individual capacity
but solely as Owner Trustee. The Trust is registered
under the Investment Company Act of 1940 (as amended)
as a diversified, closed-end, management investment
company.
The Trust was formed for the sole purpose of raising
funds through the issuance and sale of bonds (the
Bonds). The Trust commenced operations on May 12,
1988 (the Closing Date) and issued Bonds in four
tranches in the aggregate principal amount (at
maturity) of $450,922,000. The Bonds constitute full
recourse obligations of the Trust. The collateral
securing the Bonds consists primarily of a pool of
college and university facility loans (the Loans) to
various postsecondary educational institutions and
funds held under the indenture (the Indenture) and
the investment agreements. The Loans were originated
by or previously assigned to the United States
Department of Education (ED) under the College
Housing Loan Program or the Academic Facilities Loan
Program. The Loans, which have been assigned to The
First National Bank of Chicago (The Bond Trustee),
are secured by various types of collateral, including
mortgages on real estate, general recourse
obligations of the borrowers, pledges of securities
and pledges of revenues. As of the Closing Date, the
Loans had a weighted average stated interest rate of
approximately 3.18% and a weighted average remaining
term to maturity of approximately 18.77 years.
Payments on the Loans are managed by the Bond Trustee
in various fund accounts and are invested under
investment contracts (Note 2) as specified in the
Indenture.
8
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
1. Organization and All payments on the Loans and earnings under the
Business investment agreements and any required transfers from
(Continued) the Expense and Liquidity Funds are deposited to the
credit of the Revenue Fund held by the Bond Trustee
as defined within, and in accordance with, the
Indenture. On each bond payment date, amounts on
deposit to the credit of the Revenue Fund are applied
in the following order of priority: to pay amounts
due on the Bonds, to pay administrative expenses not
previously paid from the Expense Fund, to fund the
Expense Fund to the Expense Fund Requirement and to
fund the Liquidity Fund to the Liquidity Fund
Requirement. Any funds remaining in the Revenue Fund
on such payment date will be used to further pay down
the Bonds to the extent of the maximum principal
distribution amount, after which any residual amounts
are paid to the certificateholders in the order of
priority discussed in Note 5.
On the Closing Date, certificates were issued by the
Trust to ED as partial payments for the Loans. In
December 1989, ED sold, through a private placement,
all of its ownership interest in the Trust.
2. Summary of (a) College and University Facility Loans
Significant
Accounting The Loans were purchased and recorded at a discount
Policies below par. Pursuant to a "no-action letter" that the
Trust received from the Securities and Exchange
Commission, the Loans, included in Investments in the
accompanying balance sheet, are being accounted for
under the amortized cost method of accounting. Under
this method, the difference between the cost of each
Loan to the Trust and the scheduled principal and
interest payments is amortized, assuming no
prepayments of principal, and included in the Trust's
income by applying the Loan's effective interest rate
to the amortized cost of that Loan. The remaining
balance of the purchase discount on the Loans as of
November 30, 1996 was approximately $90,570,000. As a
result of prepayments of Loans in the year ended
November 30, 1996, additional interest income of
approximately $103,000 was recognized.
9
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
2. Summary of (a) College and University Facility Loans (Continued)
Significant
Accounting The Trust's policy is to discontinue the accrual of
Policies interest on Loans for which payment of principal or
(Continued) interest is 180 days or more past due or for such
other Loans as considered necessary by management if
collection of interest and principal is doubtful.
When a Loan is placed on nonaccrual status, all
previously accrued but uncollected interest is
reversed against the current period's interest
income. Subsequently, interest income is recorded
when received. Payments are applied to interest first
with the balance, if any, applied to principal. At
November 30, 1996, one loan has been placed on
nonaccrual status, as discussed in Note 6.
(b) Other Investments
Other investments, which are included in Investments
on the accompanying balance sheet, consist of two
investment agreements issued by Morgan Guaranty Trust
Company, bearing fixed rates of interest of 7.05% and
7.75%. These investments may take the form of
repurchase agreements (the underlying collateral of
which shall be as to form and substance acceptable to
each nationally recognized statistical rating agency
that rates the Bonds), time deposits or other lawful
investments at the bank's option. These investments
are carried at cost.
(c) Federal Income Taxes
It is the Trust's policy to comply with the
requirements applicable to a regulated investment
company under Subchapter M of the Internal Revenue
Code of 1986, as amended, and to distribute
substantially all of its investment company taxable
income to its certificateholders each year.
Accordingly, no federal or state income tax provision
is required.
For tax purposes, the Loans were transferred to the
Trust at their face values. Accordingly, the
accretion of the purchase discount creates a
permanent book-tax difference.
10
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
2. Summary of (d) Deferred Bond Issuance Costs
Significant
Accounting Deferred Bond issuance costs are being amortized
Policies using the effective interest rate method over the
(Continued) estimated lives of the Bonds, which are based on the
scheduled payments of the Loans. When Loan
prepayments occur, a portion of the deferred issuance
costs is expensed in the year of the prepayment, so
that the future effective interest rate remains
unchanged.
(e) Accounting for Impairment of a Loan and Allowance
for Possible Loan Losses
The Trust accounts for credit losses in accordance
with Statement of Financial Accounting Standards
(SFAS) No. 114, Accounting by Creditors for
Impairment of a Loan, as amended by SFAS No. 118
(hereafter collectively referred to as SFAS 114).
SFAS 114 requires that impaired loans, as defined, be
measured based on the present value of the expected
future cash flows discounted at the loan's effective
interest rate or the fair value of the collateral if
the loan is collateral dependent.
Management is responsible for establishing an
allowance for possible loan losses based on its best
estimate of losses that might occur. Ultimate losses
may vary from the current estimate. This estimate is
reviewed periodically, and as a provision to the
allowance for possible loan losses becomes necessary,
it is reported in the period in which it becomes
known. Allowances are established for those loans
that, in the opinion of management, are deemed to be
impaired and potentially uncollectible.
11
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
2. Summary of (e) Accounting for Impairment of a Loan and Allowance
Significant for Possible Loan Losses (Continued)
Accounting
Policies The allowance for possible loan losses is based on
(Continued) management's evaluation of the level of the allowance
required in relation to the estimated loss exposure
in the loan portfolio. Factors considered in
evaluating the adequacy of the allowance include
previous loss experience, current economic conditions
and their effect on borrowers, the performance of
individual Loans in relation to contract terms,
adverse situations that may affect the borrower's
ability to pay and the estimated fair values of
collateral.
The factors discussed above are inherently difficult
to predict. Accordingly, the final outcome of these
estimates and the ultimate realization of amounts on
certain Loans may vary significantly from the amounts
reflected in the accompanying financial statements.
(f) Presentation of Capital Distributions
Capital distributions are accounted for in accordance
with the American Institute of Certified Public
Accountants Statement of Position 93-2,
"Determination, Disclosure and Financial Statement
Presentation of Income, Capital Gain and Return of
Capital Distributions by Investment Companies" (SOP
93-2). SOP 93-2 requires the Trust to report
distributions that are in excess of tax basis
earnings and profits as a tax return of capital and
to present the capital accounts on a basis that
approximates the amounts that are available for
future distributions on a tax basis.
As all tax earnings and profits have been
distributed, accumulated undistributed net investment
income has been reclassified as paid-in capital.
These reclassifications result from permanent book
and tax differences such as the receipt of tax-exempt
interest income on certain Loans, the related
interest expense on the Bonds, and the accretion of
purchase discount on the Loans. Amounts deducted for
the loan loss reserve and dividends payable are not
currently deductible for tax purposes and have been
reclassified as an accumulated deficit. These
reclassifications had no impact on the net investment
income or net assets of the Trust.
12
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
2. Summary of (f) Presentation of Capital Distributions (Continued)
Significant
Accounting The Trust made $1,391,528 of distributions which were
Policies considered a tax return of capital for the fiscal
(Continued) year ending November 30, 1996.
(g) Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles
requires management to make estimates and assumptions
that affect the reported amounts of assets and
liabilities at the date of the financial statements
and the reported amounts of revenues and expenses
during the reporting period. Actual results could
differ from those estimates.
3. Bonds The Bonds outstanding at November 30, 1996 consist of
the following:
Outstanding Unamortized
Interest Principal Discount Carrying Value
Type Rate Stated Maturity (000s) (000s) (000s)
============================================================================
Sequential 4.00% June 1, 1999 $ 18 543 $ 117 $ 18 426
Sequential 4.00% June 1, 2002 75 961 7 886 68 075
Sequential 4.00% June 1, 2018 149 370 50 727 98 643
----------------------------------------------------------------------------
$243 874 $58 730 $185 144
============================================================================
Interest on the Bonds is payable semiannually. On
December 2, 1996 the Trust made a principal payment
of $13,783,076 on the 4%, June 1, 1999 bonds.
Principal payments on the Bonds will be made prior to
the respective stated maturities on each bond payment
date in an amount equal to the lesser of either (1)
amounts available in the Revenue Fund after certain
required payments of interest and principal (at the
stated maturity of the Bonds) and, administrative
expenses after required transfers to the Expense Fund
and the Liquidity Fund (such that the amounts on
deposit are equal to the Expense Fund Requirement and
the Liquidity Fund Requirement, respectively), or (2)
the Maximum Principal Distribution
13
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
3. Bonds Amount, as defined within the Indenture. These
(Continued) principal payments will be applied to each class of
Bonds in the order of their stated maturities, so
that no payment of principal will be made on the
Bonds of any class until all Bonds having an earlier
stated maturity have been paid in full. The estimated
aggregate principal payments on the Bonds at November
30, 1996, after taking into consideration actual Loan
prepayments, Defaulted Loans and the Maximum
Principal Distribution Amount, as defined in the
Indenture, are as follows:
Amount
Fiscal Year (000s)
=====================================================
1997 $ 23 664
1998 22 628
1999 21 274
2000 20 059
2001 18 843
Thereafter 137 406
-----------------------------------------------------
Total $243 874
=====================================================
Actual Bond principal payments may differ from
estimated payments because borrowers may prepay or
default on their obligations. The Bonds are not
subject to optional redemption by either the Trust or
the bondholders.
In the event of negative cash flows, a Liquidity Fund
has been established and maintained such that, on or
before such payment date, the Liquidity Fund may be
used by the Bond Trustee to make any required
payments on the Bonds and to pay operating expenses
of the Trust.
The original issue discount is being amortized using
the effective interest rate method over the estimated
lives of the Bonds, which are based on the scheduled
payments of the Loans. Accordingly, loan prepayments
have the effect of accelerating bond payments. When
Bond payments occur sooner than estimated payments, a
portion of the original issue discount is expensed in
the year of prepayment, so that the future effective
interest rate remains unchanged.
14
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
4. Administrative (a) Servicer
Agreements
As compensation for the services provided under the
servicing agreement, General Electric Capital
Corporation (GECC) receives a collection fee. The fee
is paid semiannually with respect to each Loan on
each date payments are received on each Loan. The fee
is equal to .075 of 1% of the outstanding principal
balance of each Loan divided by the number of
payments of principal and interest for each Loan in a
calendar year. For the year ended November 30, 1996,
this fee totaled $216,294. GECC was also reimbursed
for other related expenses of $22,914.
(b) Trustees
As compensation for services provided, the Owner and
Bond Trustees are entitled under the Declaration of
Trust and the Indenture to receive the following
fees:
o The Owner Trustee, in its capacities as manager of
the Trust and as Owner Trustee, received fees of
$15,000 and $12,500, respectively, for the year
ended November 30, 1996. In addition, the Owner
Trustee, in its capacity as manager, was
reimbursed $2,672 for out-of-pocket expenses.
o The Bond Trustee is entitled to an annual fee
equal to .015 of 1% of the aggregate outstanding
principal of the Bonds on the bond payment date
immediately preceding the date of payment of such
fee. The fee is payable semiannually in arrears on
each bond payment date. The Bond Trustee is also
reimbursed for out-of-pocket expenses in an amount
not to exceed 4% of the applicable annual fee. For
the year ended November 30, 1996, Bond Trustee
fees were $37,057. In addition, the Bond Trustee
was reimbursed $1,495 for out-of-pocket expenses.
15
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
5. Certificates The certificates comprise two classes, namely 13.65%
Class A Preferred and Class B. The Class A Preferred
certificates have preference over the Class B
certificates with respect to the payment of
dividends, rights of redemption and liquidation
payments. Dividends on the Class A Preferred
certificates are payable in cash on each Distribution
Date (defined below) at the rate of 13.65% per annum
from amounts received by the Owner Trustee pursuant
to the Declaration of Trust. To the extent that such
amounts are not sufficient to pay accrued dividends
on any Class A Preferred certificates on any
Distribution Date, such dividends will be paid in
additional certificates of the Class A Preferred
certificates. The Class A Preferred certificates are
required to be redeemed by the Trust, in whole or in
part, on any Distribution Date to the extent of the
amount on deposit to the credit of the Revenue Fund,
as discussed in Note 1, and after all accrued but
unpaid dividends thereon have been paid in full. No
distributions on the Class B certificates may be made
until all Class A Preferred certificates have been
fully redeemed. Following the redemption in full of
the Class A Preferred certificates, on each
Distribution Date, the holders of the Class B
certificates will receive amounts paid to the Owner
Trustee pursuant to the Declaration of Trust,
pro-rata, in the same proportion that the par value
of the certificates evidenced by each Class B
certificate bears to the sum of the par value of the
certificates evidenced by all of the Class B
certificates.
Dividends and other payments are distributed to the
certificateholders, while the Bonds are outstanding,
on the second business day in each June and December
(the Distribution Date) and, after the Bonds are paid
in full, on the first business day of each calendar
month.
On December 2, 1996, the Trust paid $1,897,192 to the
holders of the Class A Preferred certificates, of
which $672,570 was for payment of dividends and
$1,224,622 was a redemption of Class A Preferred
certificates. These payments are reflected as
liabilities in the accompanying balance sheet.
The certificateholders shall each be entitled to one
vote per certificate.
16
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
6. Possible Loan Losses An analysis of the allowance for possible loan losses
for the year ended November 30, 1996 is summarized as
follows:
Balance, beginning of year $632 376
Provision 200 000
Charge-off --
-----------------------------------------------------
Balance, end of year $832 376
=====================================================
At November 30, 1996, the recorded investment in
loans that are considered to be impaired under SFAS
114 was approximately $414,000 with a related
allowance for possible loan losses of $62,000.
The average recorded investment in impaired loans
during the year ended November 30, 1996 was
approximately $442,000. For the year ended November
30, 1996, interest income recognized on impaired
loans was approximately $49,000.
The amortized cost of the Loan placed on nonaccrual
status is approximately $3,000 at November 30, 1996.
See "Accounting for Impairment of a Loan and
Allowance for Possible Loan Losses" for a discussion
of the Trust's impaired loan accounting policy.
17
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
7. Loans Scheduled principal and interest payments on the
Loans as of November 30, 1996, excluding payments for
Loans in Default, as defined in the Indenture, are as
follows:
Principal Interest
Payments Payments Total
Fiscal Year (000s) (000s) (000s)
=====================================================
1997 $ 26 245 $ 8 591 $ 34 665
1998 24 920 7 764 32 684
1999 23 561 6 972 30 533
2000 22 081 6 218 28 299
2001 20 662 5 505 26 167
Thereafter 157 920 33 447 191 367
-----------------------------------------------------
Total $275 389 $68 498 $343 715
=====================================================
Expected payments may differ from contractual
payments because borrowers may prepay or default on
their obligations. Accordingly, actual principal and
interest on the loans may vary significantly from the
scheduled payments.
The following analyses summarize the stratification
of the loan portfolio by type of collateral and
institution as of November 30, 1996:
Amortized
Number Cost
Type of Collateral of Loans (000s) %
=====================================================
Loans secured by a
first mortgage 318 $ 97 771 52.9%
Loans not secured by
a first mortgage 209 87 076 47.1
-----------------------------------------------------
Total Loans 527 $184 847 100.0%
=====================================================
18
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
7. Loans Amortized
(Continued) Number Cost
Type of Institution of Loans (000s) %
=====================================================
Private 327 $ 96 648 52.3%
Public 200 88 199 47.7
-----------------------------------------------------
Total Loans 527 $184 847 100.0%
=====================================================
The ability of a borrower to meet future debt service
payments on a Loan will depend on a number of factors
relevant to the financial condition of such borrower,
including, among others, the size and diversity of
the borrower's sources of revenues; enrollment
trends; reputation; management expertise; the
availability and restrictions on the use of
endowments and other funds; the quality and
maintenance costs of the borrower's facilities; and,
in the case of some Loans to public institutions,
which are obligations of a state, the financial
condition of the relevant state or other governmental
entity and its policies with respect to education.
The ability of a borrower to maintain enrollment
levels will depend on such factors as tuition costs,
geographical location, geographic diversity, quality
of the student body, quality of the faculty and the
diversity of program offerings.
The collateral for Loans that are secured by a
mortgage on real estate generally consists of special
purpose facilities, such as dormitories, dining halls
and gymnasiums, which are integral components of the
overall educational setting. As a result, in the
event of borrower default on a Loan, the Trust's
ability to realize the outstanding balance of the
Loan through the sale of the underlying collateral
may be negatively impacted by the special purpose
nature and location of such collateral.
19
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
7. Loans A number of borrowers are currently experiencing
(Continued) financial difficulties due to declining enrollment,
increasing costs and a decline in endowments, grants,
private gifts, and State and Federal funding. Many of
these troubled borrowers are developing and
implementing strategic plans to improve their
financial position; the plans generally include
taking actions to control costs and increase revenues
through tuition increases, fundraising campaigns,
higher enrollment and a reduction of faculty.
Due to the special purpose nature of the borrowers'
properties, the ability of troubled borrowers to
repay their loans may ultimately be dependent upon
the future success of the institutions' programs.
8. Fair Value SFAS No. 107, "Disclosures about Fair Value of
of Financial Financial Instruments," allows for the use of a wide
Instruments range of valuation techniques; therefore, it may be
difficult to compare the Trust's fair value
information to independent markets or to other fair
value information. Accordingly, the fair value
information presented below does not purport to
represent, and should not be construed to represent,
the underlying "market" value of the Trust's net
assets or the amounts that would result from the sale
or settlement of the related financial instruments.
Further, as the assumptions inherent in fair value
estimates change, the fair value estimates will
change.
20
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
8. Fair Value Current market prices are not available for most of
of Financial the Trust's financial instruments since an active
Instruments market generally does not exist for such instruments.
(Continued) In accordance with the terms of the Indenture, the
Trust is required to hold all of the Loans to
maturity and to use the cash flows therefrom to
retire the Bonds. Accordingly, the Trust has
estimated the fair values of its financial
instruments using a discounted cash flow methodology.
This methodology is similar to the approach used at
the formation of the Trust to determine the carrying
amounts of these items for financial reporting
purposes. In applying the methodology, the
calculations have been adjusted for the change in the
relevant market rates of interest, the estimated
duration of the instruments and an internally
developed credit risk rating of the instruments. All
calculations are based on the scheduled principal and
interest payments on the loans because the prepayment
rate on these loans is not subject to estimate.
The estimated fair value of each category of the
Trust's financial instruments and the related book
value presented in the accompanying balance sheet as
of November 30, 1996 is as follows:
Book Value Fair Value
(000s) (000s)
=====================================================
Loans $184 015* $231 595
Investment Agreements:
Revenue Fund 21 154 20 053
Liquidity Fund 5 255 4 454
-----------------------------------------------------
$210 424 $256 102
=====================================================
Bonds $185 144 $213 846
=====================================================
* Net of Allowance for Possible Loan Losses of
$832,376
21
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 1996
(Dollar Amounts in Thousands)
(Continued)
<TABLE>
<CAPTION>
Outstanding Stated Internal Amortized
Principal Interest Maturity Rate of Cost (Notes
Balance Description Rate % Date Return % 1 and 2)
- - - - - - -
<C> <S> <C> <C> <C> <C>
COLLEGE AND UNIVERSITY LOANS (87.5%)
-------------- A --------------
$ 620 Alabama Agricultural and Mechanical University 3.000-3.750 07/01/2005 10.25 $ 452
2095 Alabama Agricultural and Mechanical University 3.000 05/01/2018 10.27 1156
171 Albion College 3.000 10/01/2009 10.56 110
598 Albright College 3.000 11/01/2015 10.23 345
45 Alcorn State University 2.875 11/01/1999 10.11 39
44 Alcorn State University 3.500 11/01/2002 10.15 36
50 Allegheny College 3.000 07/01/2015 10.38 20
24 Allentown College of St. Francis De Sales 3.000 11/01/1998 10.98 22
390 Alma College 3.750 04/01/2002 11.52 318
99 American International College 3.375 10/01/2002 10.84 79
154 Anderson University 3.500 03/01/2003 11.42 119
320 Anderson University 3.000 03/01/2006 11.19 224
82 Appalachian State University 3.500 07/01/2001 10.28 67
32 Appalachian State University 3.000 06/01/1997 10.11 29
520 Arizona State University 3.125 09/01/2001 10.17 426
370 Arizona State University 3.375 10/01/2002 10.16 298
1495 Arizona State University 3.000 04/01/2006 10.60 1073
276 Arkansas State University 3.500 04/01/2001 10.97 235
210 Arkansas State University 3.375 10/01/2000 10.25 182
833 Arkansas State University 3.750 04/01/2005 10.75 630
41 Arkansas Technical University 2.875 10/01/1999 10.21 36
2405 Auburn University 3.000 12/01/2018 9.16 1387
238 Azusa Pacific University 3.750 04/01/2015 10.88 141
-------------- B --------------
333 Ball State University 3.000 07/01/1999 9.98 289
1175 Baptist College at Charleston 3.000 03/01/2019 10.73 606
807 Baptist College at Charleston 3.000 03/01/2011 10.98 497
40 Bard College 2.750 10/01/1998 11.40 36
109 Barnard College 3.000 10/01/1997 11.06 100
272 Becker Junior College 3.000 04/01/2005 11.21 197
151 Bellarmine College 3.625 05/01/2004 11.34 117
32 Belmont Abbey College 3.000 11/01/1998 10.96 29
28 Benedict College 2.875 02/01/1999 11.83 24
163 Benedict College 3.750 11/01/2004 10.75 124
1094 Benedict College 3.000 11/01/2006 10.61 768
1970 Benedict College 3.000 11/01/2020 10.36 1006
2066 Bentley College 3.000 11/01/2007 10.57 1399
20 Bethany College 2.875 05/01/1998 11.89 18
346 Bethany College 3.375 11/01/2012 10.54 215
305 Bethany College 3.000 11/01/2017 10.40 163
610 Bethany College 3.000 11/01/2012 10.40 371
26 Bethune-Cookman College 3.000 11/01/2002 10.74 20
234 Boston Architectural Center 3.750 11/01/2004 10.77 179
215 Bradford College 3.375 10/01/2001 10.85 174
338 Brandeis University 3.000 11/01/2011 10.64 209
175 Brevard College 3.000 11/01/2004 10.71 131
96 Brevard College 3.000 05/01/2006 11.12 67
174 Bryan College 3.500 04/01/2003 11.39 136
44 Bucks County Community College 3.000 06/01/1997 10.11 33
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C> <C>
$ 49 Buena Vista College 3.500 02/01/2000 11.85 $ 43
149 Buena Vista College 3.000 02/01/2006 11.23 104
-------------- C --------------
1225 California Polytechnic State University 3.000 11/01/2006 10.05 852
420 California State University 3.000 11/01/2006 8.75 317
1400 California State University 3.000 11/01/2013 8.93 905
2848 California State University 3.000 11/01/2019 8.99 1644
192 Calvin College 3.000 11/01/2000 10.83 160
2896 Cameron University 3.000 04/01/2007 10.16 2048
335 Canisius College 3.375 05/01/2002 11.48 275
1730 Canisius College 3.000 11/01/2017 10.40 931
172 Canisius College 3.000 11/01/1999 10.89 148
24 Carnegie-Mellon University 2.750 05/01/1997 11.62 23
87 Carnegie-Mellon University 3.000 05/01/1999 11.37 77
305 Carnegie-Mellon University 3.500 11/01/2001 10.52 251
330 Carnegie-Mellon University 3.000 05/01/2009 10.73 215
1120 Carnegie-Mellon University 3.000 11/01/2017 10.51 608
217 Carroll College 3.125 06/01/2000 10.75 179
392 Carroll College 3.750 06/01/2014 10.46 236
184 Carroll College 3.000 06/01/2018 10.15 99
488 Carroll College 3.750 03/01/2015 10.93 288
340 Case Western Reserve University 3.500 04/01/2003 11.39 265
309 Catawba College 3.000 12/01/2009 10.27 201
150 Central Missouri State University 3.125 07/01/2000 10.24 126
330 Central Missouri State University 3.375 07/01/2001 10.27 271
754 Central Missouri State University 3.625 07/01/2004 10.29 574
1180 Central Missouri State University 3.000 07/01/2007 10.18 807
37 Central Texas College 3.000 11/01/1997 10.15 34
23 Central Texas College 3.000 11/01/1998 10.14 21
179 Champlain College 3.000 12/01/2013 10.19 104
645 Chapman College 3.000 10/01/2013 10.65 376
435 Chapman College 3.000 11/01/2005 10.63 311
279 Chapman College 3.000 11/01/2007 10.57 189
1790 Chateau Community Housing Association 3.000 10/01/2012 10.51 1068
90 Cisco Junior College 3.000 11/01/2005 10.04 67
110 Cisco Junior College 3.000 07/01/2005 10.15 72
48 Claflin College 3.125 04/01/2001 11.59 40
23 Claflin College 3.000 11/01/1997 11.05 23
500 Clemson University 3.000 07/01/2005 9.51 374
178 Coker College 3.000 12/01/2009 10.04 117
45 College of Notre Dame of Maryland 2.875 11/01/1997 10.61 42
126 College of Notre Dame of Maryland 3.375 11/01/2002 10.48 100
316 College of Our Lady of the Elms 3.375 10/01/2001 10.86 257
55 College of Saint Rose 2.875 04/01/1998 11.95 51
990 College of Saint Rose 3.000 05/01/2022 10.43 495
677 College of Saint Thomas 3.000 11/01/2009 10.53 450
82 College of Santa Fe 3.500 10/01/2001 10.86 67
274 College of Santa Fe 3.000 10/01/2005 10.66 196
663 College of Santa Fe 3.000 10/01/2018 10.43 353
175 College of the Holy Cross 3.500 10/01/1999 11.03 156
1170 College of the Holy Cross 3.625 10/01/2013 10.60 723
980 College of the Holy Cross 3.000 10/01/2006 10.63 680
52 College of the Virgin Islands 3.000 11/01/2002 10.15 41
117 College of the Virgin Islands 3.000 10/01/2003 10.16 90
12 Columbia College 2.750 07/01/1997 11.16 11
316 Columbia College 3.625 07/01/2004 10.90 234
100 Columbia College 3.000 07/01/2006 10.80 69
175 Concordia College 3.000 04/01/2009 11.05 116
805 Concordia College 3.000 05/01/2019 10.65 419
158 Connecticut College 3.000 11/01/1999 10.89 136
80 Cornell College 3.000 10/01/2005 10.66 57
363 Cumberland University 3.000 08/01/2017 10.52 196
-------------- D --------------
163 Daemen College 3.125 04/01/2000 11.68 140
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C> <C>
$ 705 Daemen College 3.000 04/01/2016 10.77 $ 388
209 Dakota Wesleyan University 3.000 10/01/2015 10.46 117
355 Dana College 3.000 04/01/2005 11.22 255
88 Dana College 3.500 04/01/2003 11.39 68
165 Dean Academy & Jr. College 3.500 10/01/1999 10.97 143
152 Dickinson College 3.000 05/01/2018 10.30 84
321 Dillard University 3.000 04/01/2008 11.09 218
146 Doane College 3.000 11/01/2000 10.83 122
755 Dormitory Authority State of NY (New York University) 3.000 07/01/2000 8.95 649
734 Dowling College 3.000 10/01/2010 10.75 462
187 Drexel University 2.875 05/01/2001 11.57 158
1220 Drexel University 3.500 05/01/2014 10.53 692
30 Drury College 3.125 10/01/1999 11.32 26
320 Drury College 3.000 04/01/2015 10.63 182
591 Drury College 3.000 10/01/2010 10.75 371
1245 D'Youville College 3.000 04/01/2018 10.90 668
-------------- E --------------
188 East Texas State University 2.875 09/01/1999 8.94 167
1456 East Texas State University 3.500 03/01/2002 9.48 1123
1744 East Texas State University 3.000 03/01/2002 9.60 1293
162 East Texas State University 3.000 11/01/2000 9.26 140
143 Eastern Oklahoma State College 3.125 05/15/1999 9.96 134
450 Elizabeth City State University 3.000 10/01/2017 10.02 256
590 Embry-Riddle Aeronautical University 3.000 09/01/2007 10.64 395
183 Emmanuel College 3.000 11/01/2013 10.45 106
22 Emory & Henry College 2.750 05/01/1997 11.61 21
334 Emory University 2.875 09/01/1998 11.00 296
-------------- F --------------
91 Fairleigh Dickinson University 3.125 11/01/1999 10.93 79
1840 Fairleigh Dickinson University 3.000 11/01/2017 10.39 996
26 Fairmont State College 3.000 05/01/1997 11.14 25
13 Findlay College 2.750 07/01/1998 11.04 11
5 Findlay College 3.000 07/01/1997 11.21 5
275 Florida Agricultural and Mechanical University 3.625 07/01/2004 10.29 209
293 Florida Atlantic University 3.500 07/01/2004 10.27 236
430 Florida Atlantic University 3.000 07/01/2006 10.18 290
226 Florida Institute of Technology 3.000 11/01/2009 10.53 145
93 Florida Southern College 3.000 11/01/1999 10.89 80
215 Florida State University 3.000 01/01/1999 9.20 196
305 Florida State University 3.500 06/01/2001 8.44 262
895 Florida State University 3.000 01/01/2009 9.40 630
73 Fort Hays State University 3.500 10/01/2001 10.19 61
158 Fort Hays State University 3.625 10/01/2002 10.18 128
200 Fort Hays State University 3.000 10/01/2007 10.08 138
705 Fort Lewis College 3.000 10/01/2006 10.09 502
-------------- G --------------
835 Gannon University 3.000 11/01/2011 10.49 512
219 Gannon University 3.000 12/01/2022 10.13 108
105 Gavilan College 3.000 04/01/2006 10.59 75
124 George Fox College 3.500 04/01/2001 11.25 104
868 George Fox College 3.000 07/01/2018 10.64 457
251 George Washington University 3.500 05/01/2000 11.30 217
1118 George Washington University 3.500 11/01/2002 10.50 908
75 George Washington University 3.000 11/01/1998 10.58 67
106 Georgetown College 3.000 12/01/1999 10.02 92
627 Georgetown College 3.000 12/01/2008 10.04 421
1080 Georgetown College 3.000 12/01/2009 10.05 706
3086 Georgetown University 3.000 11/01/2020 10.36 1577
7796 Georgetown University 4.000 11/01/2020 10.52 4384
1595 Georgetown University 3.000 05/01/2005 10.86 1165
965 Georgia Education Authority Board of Regents
of the University System of Georgia 3.375 01/01/2003 10.60 767
124 Grambling State University 3.000 10/01/1997 10.17 115
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C> <C>
$ 19 Grambling State University 3.000 11/01/1999 10.12 $ 17
166 Grambling State University 3.000 11/01/2000 10.11 140
-------------- H --------------
448 Hampshire College 3.000 07/01/2013 10.75 259
1599 Hampshire College 3.000 02/01/2014 10.70 919
285 Harcum Junior College 3.375 11/01/2002 10.77 225
940 Harper Grace Hospital 3.625 04/01/2005 11.26 694
145 Henderson State University 3.125 04/01/1999 11.06 129
13 Hendrick Medical Center 3.000 10/01/1997 11.08 12
201 Hesston College 3.000 04/01/2006 11.14 141
390 High Point College 3.000 12/01/2010 10.26 243
2309 Hinds Junior College 3.000 04/01/2013 10.42 1416
153 Hiwassee College 3.375 01/01/2003 11.58 120
221 Hiwassee College 3.000 09/15/2018 10.58 117
2345 Hofstra University 3.000 11/01/2012 10.61 1413
46 Holy Family College 3.000 12/01/1997 10.00 42
328 Hood College 3.625 11/01/2014 10.54 199
465 Houston Tillotson College 3.500 04/01/2014 10.90 280
90 Huntingdon College 3.500 03/01/2002 11.54 72
315 Huntingdon College 3.000 10/01/2008 10.60 207
-------------- I --------------
67 Illinois Benedictine College 3.000 10/01/1998 10.98 60
278 Illinois Institute of Technology 3.000 03/01/2003 11.10 214
53 Indiana University 2.750 12/01/1996 8.06 51
476 Indiana University 2.875 04/01/1998 10.10 445
182 Indiana University 2.875 04/01/1999 10.08 165
672 Indiana University 3.375 04/01/2001 10.06 576
1420 Indiana University 3.500 04/01/2001 10.06 1214
1948 Indiana University 3.750 12/01/2003 8.84 1617
565 Indiana University 3.000 07/01/1999 9.31 496
152 Inter American University of Puerto Rico 3.000 09/01/2007 10.66 104
2777 Inter American University of Puerto Rico 3.000 01/01/2017 10.94 1482
-------------- J --------------
2045 James Madison University 3.000 06/01/2009 10.49 1305
58 John Brown University 2.875 04/01/2000 11.64 49
453 Johnson & Wales College 3.000 11/01/2013 10.59 267
295 Johnson C. Smith University 3.000 05/01/2005 11.18 214
40 Judson College 3.750 07/01/2004 10.92 30
-------------- K --------------
286 Kansas State University 3.375 10/01/2002 9.12 239
775 Kansas State University 3.625 04/01/2004 9.77 573
134 Kendall College 3.375 10/01/2002 10.82 105
286 Kendall College 3.000 10/01/2008 10.59 188
716 Kent State University 3.500 12/01/2000 8.90 625
450 Knox College 3.000 04/01/2006 11.15 315
-------------- L --------------
385 LaGrange College 3.000 03/01/2009 11.06 247
18 Lamar University 2.875 04/01/1997 11.17 18
319 Lamar University 3.500 04/01/2003 10.76 252
439 Langston University 3.375 10/01/2003 10.15 344
1325 Langston University 3.000 04/01/2007 10.56 926
514 Lassen Junior College District 3.000 04/01/2020 10.27 271
1915 Leland Stanford Junior College 3.375 05/01/2003 11.33 1489
244 Lenoir Rhyne College 3.000 12/01/2006 10.04 173
91 Linfield College 3.000 10/01/2017 10.44 49
196 Long Island University 3.000 10/01/1998 11.00 175
996 Long Island University 3.750 05/01/2005 11.22 742
261 Long Island University 3.000 11/01/2009 10.69 169
911 Long Island University 3.000 11/01/2009 10.69 590
569 Long Island University 3.750 04/01/2003 11.41 447
620 Long Island University 3.625 06/01/2014 10.49 370
41 Long Island University 3.750 05/01/1998 11.90 38
146 Long Island University 3.750 10/01/2004 10.79 110
533 Louisiana State University 3.500 07/01/2001 8.65 460
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C> <C>
$1256 Louisiana State University 3.625 07/01/2004 9.04 $1000
303 Louisiana State University 3.000 07/01/2005 8.84 234
503 Louisiana State University 3.000 07/01/2005 8.84 389
435 Louisiana State University 3.000 07/01/2006 8.87 330
229 Louisiana State University 3.000 05/01/1999 9.17 211
414 Louisiana State University 3.000 07/01/2001 8.62 350
90 Loyola University 3.000 11/01/1998 10.96 80
86 Loyola University - Mundelein Branch 3.750 11/01/1997 11.11 80
287 Lycoming College 3.500 05/01/2001 11.22 241
277 Lycoming College 3.625 05/01/2014 10.64 169
370 Lycoming College 3.750 05/01/2015 10.62 225
573 Lynchburg College 3.750 05/01/2015 10.64 351
725 Lynchburg College 3.000 05/01/2018 10.68 387
-------------- M --------------
720 Macalester College 3.375 05/01/2002 11.41 577
491 Macalester College 3.000 05/01/2020 10.46 255
40 Madison General Hospital 3.000 12/01/1999 9.67 35
610 Marian College 3.000 10/01/2016 10.45 336
56 Marian College 3.000 11/01/1999 10.89 48
80 Marist College 3.500 04/01/2000 11.73 70
100 Marquette University 3.000 07/31/2024 10.59 47
43 Mary Baldwin College 2.875 11/01/1999 10.94 38
493 Mary Baldwin College 3.375 05/01/2012 10.68 310
710 Marymount University 3.000 05/01/2016 10.52 397
20 McCook Community College 3.000 01/01/1998 11.16 18
1065 McLennan Community College 3.000 04/01/2006 10.49 770
108 McNeese State University 3.500 10/01/2001 10.18 89
1194 Memorial Hospital for Cancer and Allied Diseases 3.375 04/01/2012 10.68 751
139 Menlo College 3.125 04/01/2001 11.53 114
549 Mercer University 3.000 05/01/2014 10.58 320
1660 Mercy College of Detroit 3.625 10/01/2013 10.59 1010
28 Mercy Hospital (A) 3.000 10/01/1998 10.98 3
48 Merrimack College 3.000 04/15/2019 10.53 32
133 Merrimack College 3.000 04/15/2008 10.79 70
112 Middlebury College 3.375 10/01/2002 11.12 89
131 Midland Lutheran College 3.000 04/01/2005 11.20 95
40 Midland Lutheran College 3.000 10/01/1998 10.98 36
628 Millsaps College 3.000 11/01/2021 10.34 315
114 Mississippi State University 2.875 01/01/2000 10.99 97
1730 Mississippi State University 3.000 12/01/2020 9.64 936
129 Mississippi Valley State University 3.500 07/01/2001 10.28 106
138 Molloy College 3.375 10/01/2002 10.81 109
18 Montreat-Anderson College 3.000 11/01/1998 10.96 16
258 Moravian College 3.375 11/01/2012 10.52 159
785 Morehouse College 3.000 07/01/2010 10.50 441
2565 Morgan State University 3.000 11/01/2014 10.56 1478
254 Morris Brown College 3.750 05/01/2007 11.12 179
2251 Morris Brown College 2.750-3.750 05/01/2018 10.89 1338
723 Morris College 3.000 11/01/2009 10.53 465
160 Muhlenberg College 3.000 11/01/2000 10.50 139
-------------- N --------------
178 New England College 3.000 04/01/2016 10.77 98
755 Newark Beth Israel Hospital 3.625 01/01/2014 11.06 446
80 NIACC Dormitories, Inc. 3.000 10/01/2012 10.27 49
107 Nicholls State University 3.000 09/01/1999 8.88 95
3092 Norfolk State University 3.000 12/01/2021 9.77 1614
727 North Carolina Agricultural and
Technical State University 3.000 05/01/2014 10.34 430
740 North Carolina State University 3.625 09/01/2004 7.97 616
366 North Carolina State University 3.125 09/01/2001 7.58 322
430 North Carolina State University 3.500 09/01/2001 7.63 380
200 North Greenville College 3.000 11/01/2003 10.72 154
331 Northeast Louisiana University 3.500 04/01/2001 10.28 284
24 Northeast Missouri State University 2.875 05/01/1997 11.14 23
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C> <C>
$ 568 Northeast Missouri State University 3.375-3.500 05/01/2002 10.75 $ 466
148 Northeastern Oklahoma State University 3.000 06/01/1998 9.73 133
3379 Northeastern University 3.000 05/01/2018 10.53 1809
178 Northeastern University 3.000 05/01/2004 10.97 134
124 Northwest Nazarene College 3.750 04/01/2003 11.44 98
100 Northwestern State University 3.125 10/01/2000 10.15 85
495 Nova University 3.000 12/01/2007 10.04 342
-------------- O -------------
28 Occidental College 3.000 10/01/1997 11.09 26
303 Occidental College 3.000 10/01/2019 10.41 157
922 Oklahoma City University 3.000 04/01/2005 11.22 667
265 Olympic Community College 3.000 10/01/2008 10.07 179
82 Ouachita Baptist University 3.125 12/01/1999 10.03 68
37 Ouachita Baptist University 3.000 12/01/2006 10.04 25
-------------- P -------------
21 Pacific University 3.000 11/01/1999 10.89 18
1040 Paine College 3.000 10/01/2016 10.45 570
25 Pan American University 3.000 10/01/1999 9.23 22
2621 Philadelphia College of Art 3.000 01/01/2022 10.62 1283
810 Pine Manor College 3.625 10/01/2003 10.80 624
57 Point Loma Nazarene College 2.875 04/01/1999 11.85 51
20 Point Loma Nazarene College 2.875 04/01/1998 11.89 18
195 Polytechnic University 3.375 10/01/2011 10.59 122
1653 Portland Student Services Inc. 3.000 01/01/2011 10.36 1039
238 Post College 3.000 04/01/2010 10.76 151
1455 Purdue University 3.625 07/01/2004 9.33 1142
418 Purdue University 3.000 07/01/2005 9.26 318
-------------- Q -------------
49 Queens College 3.000 07/01/1998 11.07 43
69 Queens College 3.500 11/01/2001 10.88 58
200 Queens College 3.625 07/01/2004 10.90 149
-------------- R -------------
365 Randolph-Macon College 3.000 05/01/2010 10.72 234
374 Randolph-Macon College 3.000 11/01/2000 10.50 313
600 Regis College (Denver) 3.000 11/01/2012 10.47 358
189 Regis College (Weston) 3.375 10/01/2002 10.85 153
290 Rhode Island College 3.000 10/01/2005 10.09 212
185 Rider College 3.500 05/01/2001 11.57 157
368 Rider College 3.375 05/01/2002 11.44 297
137 Rider College 3.125 11/01/2000 10.86 115
1945 Rider College 3.625 11/01/2013 10.42 1167
497 Rider College 3.000 05/01/2017 10.70 270
127 Rio Grande College 3.000 03/30/2009 10.93 84
70 Roberts Wesleyan College 3.000 11/01/2000 10.83 58
253 Roger Williams College 3.000 11/01/1999 10.89 218
81 Russell Sage College 3.000 10/01/1998 10.98 72
300 Rutgers, The State University 2.750 05/01/1999 8.84 275
755 Rutgers, The State University 3.750 05/01/2016 9.19 493
70 Rutgers, The State University 2.875 05/01/1999 8.80 65
1015 Rutgers, The State University 3.125 05/01/2001 8.89 912
-------------- S -------------
180 Saint Ambrose University 3.000 11/01/2001 10.78 145
185 Saint Anselm College 3.375 10/01/2001 10.88 152
57 Saint Edward's University 3.125 04/01/2000 11.69 49
138 Saint John's University 3.000 10/01/2002 10.76 107
215 Saint Joseph Hospital 3.500 10/01/2001 10.87 175
228 Saint Louis College of Pharmacy 3.375 10/01/2004 10.74 170
116 Saint Louis University 3.125 10/01/2000 10.90 97
584 Saint Louis University 3.500 11/01/2002 10.80 466
142 Saint Mary's College 3.000 03/01/2005 11.25 102
459 Saint Mary's College 3.000 06/01/2020 10.14 237
45 Saint Mary's University of San Antonio 3.000 10/01/1998 10.98 40
2248 Saint Michael's College 3.000 05/01/2013 10.60 1338
401 Saint Norbert College 3.375 04/01/2002 11.52 328
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C> <C>
$ 294 Saint Norbert College 3.625 04/01/2004 11.33 $ 223
487 Saint Norbert College 3.000 04/01/2007 11.10 333
560 Saint Paul's College 3.000 11/01/2014 10.56 323
170 Saint Peter's College 3.000 05/01/1999 11.70 150
740 Saint Vincent College 3.500 05/01/2013 10.86 452
60 Sam Houston State University 2.875 10/01/1997 8.74 56
430 Sam Houston State University 3.500 10/01/2001 9.10 367
1115 San Diego State University 3.000 11/01/2007 10.04 795
1395 Sangamon State University 3.000 11/01/2018 10.12 789
505 Seattle University 3.500 11/01/2001 10.84 415
613 Seattle University 3.000 11/01/2008 10.55 404
420 Seton Hall University 3.000 11/01/2000 10.83 349
375 Seton Hill College 3.625 11/01/2014 10.53 225
33 Siena College 2.875 10/01/1997 11.08 30
38 Sierra College 3.375 04/01/2002 10.87 32
356 Simpson College 3.000 07/01/2016 10.58 193
17 South Dakota School of Mines and Technology 2.750 04/01/1997 11.17 16
440 South Dakota School of Mines and Technology 3.000 04/01/2018 10.30 239
437 South Dakota School of Mines and Technology 3.625 04/01/2002 10.85 363
45 South Plains College 3.500 10/01/2002 10.18 36
108 South Plains College 3.625 10/01/2004 10.17 83
75 South Plains College 3.000 10/01/2005 10.10 56
630 Southeast Missouri State University 3.500 04/01/2002 10.82 514
1486 Southeast Missouri State University 3.000 04/01/2007 10.58 1049
68 Southeastern Louisiana University 2.750 04/01/1997 11.16 65
915 Southeastern Oklahoma State University 3.000 04/01/2009 10.51 608
204 Southern Arkansas University 3.500 10/01/2002 10.23 164
666 Southern Methodist University 3.000 10/01/2007 10.61 449
318 Southern Nazarene University 3.750 04/01/2005 11.27 236
100 Southern University and
Agricultural and Mechanical College 2.875 04/01/1998 11.13 94
40 Southwest Missouri State College 2.875 10/01/1997 10.16 37
965 Southwest Missouri State College 3.375 10/01/2002 10.17 786
2625 Southwest Texas State University 3.000 10/01/2015 9.51 1564
26 Southwestern Christian College 3.000 11/01/2000 10.83 22
66 Spalding University 3.125 09/01/2000 10.95 56
451 Spalding University 3.000 09/01/2007 10.66 310
57 Springfield College 3.500 11/01/1999 10.60 50
67 Springfield College 3.125 05/01/2000 11.29 58
553 Springfield College 3.500 05/01/2013 10.67 347
111 Springfield College 3.000 05/15/2005 10.11 84
240 State Center Community College 3.000 10/01/2004 10.10 180
78 Stephen F. Austin State University 2.875 10/01/1999 9.23 69
2232 Stephen F. Austin State University 3.375-3.500 10/01/2012 9.57 1457
243 Stetson University 3.000 01/01/2006 11.25 167
196 Stillman College 3.750 02/01/2004 11.42 148
433 Stonehill College 3.000 10/01/2006 10.64 302
56 Stonehill College 3.000 11/01/1998 10.96 50
175 SUNY, Mohawk Valley Community College 3.000 04/01/2005 10.26 107
134 Susquehanna University 3.125 05/01/2000 11.27 115
840 Syracuse University 3.000 05/01/2008 10.74 565
-------------- T -------------
91 Talladega College 3.375 12/01/2001 10.08 75
480 Talladega College 3.000 12/01/2012 10.24 289
314 Taylor University 3.000 10/01/2012 10.50 187
951 Taylor University 3.000 10/01/2013 10.49 557
206 Temple University 3.125 03/01/1999 10.70 186
384 Tennessee State University 3.375 01/01/1999 11.10 340
806 Texas A & I University 3.000 07/01/2009 9.57 542
90 Texas A & I University 3.000 06/01/1998 9.10 82
238 Texas Southern University 3.500 04/01/2001 10.89 202
575 Texas Southern University 3.500 04/01/2013 10.45 358
547 Transylvania University 3.000 11/01/2010 10.51 343
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C> <C>
$1050 Trinity University 3.625 09/01/2004 10.82 $ 785
502 Tufts University 3.375 10/01/2001 10.87 410
2513 Tufts University 3.000 10/01/2021 10.39 1255
101 Tulane University of Louisiana 2.875 10/01/1997 8.62 95
185 Tulane University of Louisiana 3.000 10/01/1998 8.74 170
925 Tulane University of Louisiana 3.375-3.500 10/01/2001 9.06 786
-------------- U -------------
64 Union College 3.000 11/01/2002 10.74 50
2260 University of Alabama in Birmingham 3.000 11/01/2008 7.97 1700
187 University of Alabama in Huntsville 3.000 05/01/1999 10.05 169
164 University of Alaska 3.500 04/01/2000 10.94 142
268 University of Alaska 3.375 04/01/2002 10.82 219
631 University of Alaska 3.500 04/01/2003 10.80 513
380 University of Alaska 3.000 10/01/1999 10.22 342
368 University of Arizona 3.500 04/01/2003 10.82 300
203 University of Arkansas at Little Rock 3.500 04/01/2001 10.04 174
215 University of Arkansas at Little Rock 3.000 11/01/2009 9.42 149
15 University of Central Arkansas 2.750 04/01/1997 11.24 14
638 University of Central Arkansas 3.000 04/01/2005 10.69 469
635 University of Central Florida 3.000 10/01/2007 10.08 439
420 University of Chicago 3.500 12/01/2001 10.10 345
133 University of Chicago 3.375 12/01/2001 10.08 109
48 University of Chicago 3.500 12/01/2002 10.11 38
75 University of Delaware 2.750 11/01/1997 8.54 71
200 University of Delaware 3.125 11/01/2000 8.84 175
318 University of Delaware 3.375 11/01/2000 8.81 284
1510 University of Delaware 3.000 11/01/2006 9.08 1124
739 University of Delaware 3.000 12/01/2018 8.81 432
2565 University of Florida 3.000 07/01/2014 10.15 1490
28 University of Hartford 3.000 05/01/1997 12.02 27
212 University of Hartford 3.000 11/01/2001 10.78 171
80 University of Hawaii at Manoa 2.875 10/01/1999 10.13 69
96 University of Hawaii at Manoa 3.500 10/01/2001 10.18 80
93 University of Lowell 3.000 11/01/2000 7.62 84
2975 University of Michigan 3.750 10/01/2005 9.51 2299
280 University of Michigan 3.000 04/01/1999 10.08 253
160 University of Missouri 2.875 05/01/1997 10.10 154
140 University of Missouri 3.000 05/01/1998 10.07 131
1333 University of Missouri 3.375 05/01/2002 10.03 1140
187 University of Missouri 2.875 11/01/2000 9.25 166
212 University of Missouri 3.000 05/01/1998 10.07 198
35 University of Missouri 3.000 05/01/1998 10.08 33
138 University of Montevallo 3.125 11/01/2000 9.27 119
261 University of Nevada at Reno 3.000 11/01/1999 10.12 228
982 University of North Carolina 3.000 11/01/2005 8.81 763
745 University of North Carolina 3.000 01/01/2008 9.50 528
67 University of North Carolina 3.000 01/01/2007 9.50 49
1118 University of Notre Dame 3.000 02/15/2019 10.62 584
93 University of Portland 2.875 04/01/1998 11.96 86
930 University of Portland 3.375 04/01/2013 10.88 570
89 University of Portland 3.000 11/01/1998 10.98 80
53 University of Puerto Rico, Rio Piedras Campus 3.125 06/01/2000 9.17 46
2049 University of Puerto Rico, Rio Piedras Campus 3.000 06/01/2011 9.39 1327
66 University of Rhode Island 3.000 10/01/2001 9.68 55
68 University of Rochester 2.875 10/01/1998 11.04 62
716 University of Saint Thomas 3.000 10/01/2019 10.41 371
610 University of Santa Clara 3.125 04/01/2002 11.44 484
275 University of Santa Clara 3.375 04/01/2002 11.45 219
1305 University of Santa Clara 3.625 04/01/2004 11.33 992
64 University of Scranton 3.125 11/01/2000 10.84 53
257 University of South Dakota 3.500 10/01/2001 9.59 217
1120 University of South Florida 3.750 07/01/2005 10.30 832
405 University of Steubenville 3.125 04/01/2010 10.98 257
36 University of Tampa 2.875 11/01/1998 10.95 32
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C> <C>
$ 125 University of Texas at Arlington 3.000 07/01/1998 9.87 $ 112
1426 University of Vermont 3.000 07/01/2016 8.95 868
290 University of Vermont 3.375 07/01/2001 8.33 252
1300 University of Vermont 3.000 07/01/2019 9.06 743
260 University of Washington 3.000 08/01/1999 8.82 231
380 University of Washington 3.500 08/01/2002 9.07 315
423 University of Washington 3.000 08/01/2003 9.06 336
1735 University Student Co-Operative Association 3.000 04/01/2019 10.70 901
186 Ursinus College 3.000 10/01/2000 10.86 154
607 Utica College 3.000 11/01/2009 10.53 391
-------------- V -------------
570 Vermont State College 3.000 06/01/2008 9.02 403
291 Vermont State College 3.000 07/01/2014 9.30 179
1295 Villanova University 3.000 04/01/2019 10.70 673
4080 Vincennes University 3.000 06/01/2023 9.02 2191
3002 Virginia Commonwealth University 3.000 06/01/2011 10.01 1872
1360 Virginia Commonwealth University 3.000 06/01/2004 10.08 1012
406 Virginia Wesleyan College 3.000 11/01/2009 10.54 265
232 Virginia Wesleyan College 3.000 11/01/2010 10.51 146
-------------- W -------------
39 Waldorf College 3.125 07/01/2000 10.97 32
301 Waldorf College 3.000 07/01/2005 10.77 212
69 Wartburg College 3.500 10/01/2001 10.87 56
186 Wartburg College 3.750 04/01/2011 11.00 120
985 Washington State University 3.625 04/01/2004 10.02 780
640 Washington State University 3.750 04/01/2004 10.03 510
1130 Washington State University 3.375 04/01/2003 10.02 911
75 Washington State University 3.000 04/01/1999 10.08 68
164 Washington University 3.000 10/01/1998 11.05 149
497 Washington University 3.500 10/01/2001 10.91 414
151 Wayne State University 3.000 04/01/2000 11.69 138
264 Wesley College 3.375 05/01/2013 10.88 163
92 West Kern Junior College District 3.625 04/01/2004 10.73 71
590 West Valley College 3.000 04/01/2009 10.50 392
400 West Virginia State College 3.000 05/01/1998 11.05 370
247 West Virginia Wesleyan College 2.875 05/01/2000 11.56 215
517 West Virginia Wesleyan College 3.000 05/01/2015 10.75 292
584 Western Carolina University 3.625 05/01/2003 10.75 471
130 Western Washington University 3.125 10/01/1998 10.18 118
325 Western Washington University 3.500 10/01/2001 10.18 269
790 Western Washington University 3.625 10/01/2004 10.18 606
555 Western Washington University 3.750 10/01/2005 10.19 418
285 Westminster College of Salt Lake 3.000 11/01/2017 10.39 154
65 Westmoreland Hospital Association 3.500 07/01/2001 10.98 52
46 Wheaton College 2.875 04/01/1999 11.50 42
960 Wheaton College 3.500 04/01/2013 10.70 589
284 Wheeling College 3.500 05/01/2001 11.23 227
103 Wheeling College 3.000 11/01/2007 10.59 70
31 Wheelock College 3.000 05/01/2011 10.23 20
65 Wichita State University 3.000 10/01/2000 9.29 56
880 Wittenberg University 3.000 05/01/2015 10.76 495
263 Wittenberg University 3.000 11/01/2017 10.39 142
60 Wooster Business College 3.000 03/30/2009 10.88 40
47 Worcester Polytechnic Institute 2.750 10/01/1997 11.04 43
209 Worcester Polytechnic Institute 3.375 04/01/2001 11.57 174
809 Wright State University 3.000 05/01/2009 9.89 561
-------------- Y -------------
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C> <C>
398 York Hospital 3.000 05/01/2020 10.64 205
------ -------
$275417 Total College and University Loans $184847
Allowance for Possible Loan Losses 832
Net College and University Loans 184015
INVESTMENT AGREEMENTS (12.5%)
Morgan Guaranty Trust Company -
$ 5255 Liquidity Fund 7.750 06/01/2018 7.75 $ 5255
Morgan Guaranty Trust Company -
21154 Revenue Fund 7.050 06/01/2018 7.05 21154
------ -------
$ 26409 Total Investment Agreements $ 26409
------ -------
$301826 Total Investments (100.0%) $ 210424
</TABLE>
(A) This institution has filed for bankruptcy under Chapter 11 of the Federal
Bankruptcy Code and has been placed on nonaccrual status as more fully
discribed in Note 6.
<PAGE>
(Signature Page, to follow Item 79 at Screen Number 40, Page Number 33)
This report is signed on behalf of the registrant in the City of Boston and
the Commonwealth of Massachusetts on the 29th day of January, 1997.
COLLEGE AND UNIVERSITY FACILITY
LOAN TRUST TWO
By: State Street Bank and Trust
Company, not in its individual
capacity, but solely as Owner
Trustee under a Declaration of Trust
dated March 11, 1988 and amended and
restated on May 12, 1988, and
December 4, 1989.
By: James E. Schultz
Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains financial information extracted from the November 30,
1996 College and University Facility Loan Trust Two financial statements and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 210424
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 2110
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1092
<TOTAL-ASSETS> 213626
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 185144
<OTHER-ITEMS-LIABILITIES> 7036
<TOTAL-LIABILITIES> 192180
<SENIOR-EQUITY> 8630
<PAID-IN-CAPITAL-COMMON> 12557
<SHARES-COMMON-STOCK> 1763800
<SHARES-COMMON-PRIOR> 1763800
<ACCUMULATED-NII-CURRENT> (1505)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 21446
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 21306
<OTHER-INCOME> 0
<EXPENSES-NET> 18223
<NET-INVESTMENT-INCOME> 3083
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2883
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1392
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (413)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 12557
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 17734
<GROSS-EXPENSE> 18223
<AVERAGE-NET-ASSETS> 21730
<PER-SHARE-NAV-BEGIN> 6.42
<PER-SHARE-NII> 1.75
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> .79
<PER-SHARE-NAV-END> 7.27
<EXPENSE-RATIO> .84
<AVG-DEBT-OUTSTANDING> 193251
<AVG-DEBT-PER-SHARE> 109.57
</TABLE>
