College and University
Facility Loan Trust Two
================================================================================
Compiled Financial Statements
Six Months Ended May 31, 1998
<PAGE>
Accountants' Compilation Report
To the Owner Trustee of
College and University Facility
Loan Trust Two:
We have compiled the accompanying balance sheet of College and University
Facility Loan Trust Two (the Trust), including the schedule of investments, as
of May 31, 1998, and the related statements of operations, cash flows, changes
in net assets and financial highlights for the six months then ended, in
accordance with standards established by the American Institute of Certified
Public Accountants. The financial information for the years ended November 30,
1997, 1996, 1995, 1994 and 1993, presented herein for comparative purposes, was
audited by other auditors whose report thereon dated January 13, 1998 expressed
an unqualified opinion.
A compilation is limited to presenting in the form of financial statements
information that has been obtained from the books and records of the Trust. We
have not audited or reviewed the accompanying financial statements or
supplemental material and, accordingly, do not express an opinion or any other
form of assurance on them.
We are not independent with respect to College and University Facility Loan
Trust Two.
BDO Seidman, LLP
July 27, 1998
<PAGE>
College and University
Facility Loan Trust Two
Balance Sheet
<TABLE>
<CAPTION>
============================================================================================
May 31, 1998
============================================================================================
Assets
<S> <C>
Investments, at amortized cost, net of allowance for possible loan
losses of $1,132,376 (Notes 1, 2, 6, 7 and 8 and Schedule of Investments) $181,255,577
Cash 81,668
Prepaid expenses 13,750
Interest receivable 1,713,057
Deferred bond issuance costs (Note 2) 765,162
- --------------------------------------------------------------------------------------------
Total assets 183,829,214
============================================================================================
Liabilities
Bonds payable, net of unamortized discount (Notes 3 and 8) 158,091,969
Interest payable (Note 3) 4,120,895
Dividends payable (Note 5) 324,830
Payable for redemption of Class A Preferred Certificates (Note 5) 1,510,499
Accrued expenses and other liabilities 421,079
- --------------------------------------------------------------------------------------------
Total liabilities 164,469,272
- --------------------------------------------------------------------------------------------
Net Assets
Class A Preferred Certificates, par value $1 - authorized and outstanding -
3,911,618 certificates (preference as to annual dividends of 13.65%,
mandatory redemption and liquidation at par value) (Note 5) 3,911,618
- --------------------------------------------------------------------------------------------
Class B Certificates, par value $1 - authorized, issued
and outstanding - 1,763,800 certificates (Note 5) 1,763,800
Accumulated deficit (Note 2) (1,394,282)
Paid-in capital (Note 2) 15,078,806
- --------------------------------------------------------------------------------------------
Total net assets applicable to Class B certificateholders 15,448,324
- --------------------------------------------------------------------------------------------
Total net assets $ 19,359,942
============================================================================================
Net asset value per Class B certificate
(based on 1,763,800 certificates outstanding) $ 8.76
============================================================================================
See accompanying accountants' compilation
report and notes to financial statements.
3
</TABLE>
<PAGE>
College and University
Facility Loan Trust Two
Statement of Operations
================================================================================
Six months ended May 31, 1998
================================================================================
Investment income:
Interest income (Note 2) $9,519,260
- --------------------------------------------------------------------------------
Expenses:
Interest expense (Note 3) 7,776,260
Servicer fees (Note 4) 114,052
Trustee fees (Note 4) 29,646
Other trust and bond administration expenses 127,763
- --------------------------------------------------------------------------------
Total expenses 8,047,721
- --------------------------------------------------------------------------------
Net investment income 1,471,539
Provision for possible loan losses (Notes 2 and 6) (100,000)
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,371,539
Dividends to Class A Preferred Certificateholders (324,830)
- --------------------------------------------------------------------------------
Net increase in net assets applicable to Class B
certificateholders resulting from operations $1,046,709
================================================================================
See accompanying accountants' compilation
report and notes to financial statements.
4
<PAGE>
College and University
Facility Loan Trust Two
Statement of Cash Flows
================================================================================
Six months ended May 31, 1998
================================================================================
Cash flows from operating activities:
Interest received $ 4,534,866
Interest paid (4,397,040)
Operating expenses paid (184,303)
- --------------------------------------------------------------------------------
Net cash used for operating activities (46,477)
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Net decrease in funds held under investment agreements 2,676,835
Principal payments on Loans 12,788,073
- --------------------------------------------------------------------------------
Net cash provided by investing activities 15,464,908
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Principal repayments on Bonds (13,807,259)
Dividends on Class A Preferred certificates (523,357)
Redemptions of Class A Preferred certificates (1,408,615)
- --------------------------------------------------------------------------------
Net cash used for financing activities (15,739,231)
- --------------------------------------------------------------------------------
Net decrease in cash (320,800)
Cash, beginning of period 402,468
- --------------------------------------------------------------------------------
Cash, end of period $ 81,668
================================================================================
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 $ 1,371,539
Provision for possible loan losses 100,000
Decrease in interest receivable 255,504
Increase in prepaid expenses (13,750)
Increase in accrued expenses and other liabilities 100,908
Decrease in Bond interest payable (276,145)
Amortization of original issue discount on Bonds 3,586,749
Amortization of purchase discount on Loans (5,239,898)
Amortization of deferred Bond issuance costs 68,616
- --------------------------------------------------------------------------------
Net cash used for operating activities $ (46,477)
================================================================================
See accompanying accountants' compilation
report and notes to financial statements.
5
<PAGE>
College and University
Facility Loan Trust Two
Statement of Changes in Net Assets
(Note 2 (f))
<TABLE>
<CAPTION>
==========================================================================================
Six Months
Ended Year Ended
May 31, November 30,
1998 1997
==========================================================================================
From operations:
<S> <C> <C>
Net investment income $ 1,471,539 $ 2,897,815
Provision for possible loan losses (100,000) (200,000)
Dividends to certificateholders (Notes 2 and 5):
Class A Preferred certificateholders
($.1365 per certificate annually):
From net investment income (324,830) --
As tax return of capital -- (1,112,346)
- ------------------------------------------------------------------------------------------
Net increase in net assets applicable to Class B
certificateholders resulting from operations 1,046,709 1,585,469
- ------------------------------------------------------------------------------------------
Capital certificate transactions (Note 5):
Redemptions of Class A Preferred certificates,
(1,510,499 and 3,229,372 certificates in 1998
and 1997, respectively) (1,510,499) (3,229,372)
Issuance of Class A Preferred certificates as
Payment-in-kind dividend (21,609 certificates in 1997) -- 21,609
- ------------------------------------------------------------------------------------------
Net decrease in net assets resulting from
capital certificate transactions (1,510,499) (3,207,763)
- ------------------------------------------------------------------------------------------
Net decrease in net assets (463,790) (1,622,294)
Net assets:
Beginning of period 19,823,732 21,446,026
- ------------------------------------------------------------------------------------------
End of period $ 19,359,942 $ 19,823,732
==========================================================================================
See accompanying accountants' compilation
report and notes to financial statements.
6
</TABLE>
<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>
=================================================================================================================================
For the Six
Months Ended Years Ended November 30,
May 31, ---------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.17 $7.27 $6.42 $5.69 $4.77 $3.79
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .83 1.64 1.75 1.86 2.09 2.15
Provision for possible loan losses (.06) (.11) (.11) (.24) (.11) --
Dividends to Class A Preferred
Certificateholders:
From net investment income (.18) -- -- (.43) (.26) (1.17)
As tax return of capital -- (.63) (.79) (.46) (.80) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.76 $8.17 $7.27 $6.42 $5.69 $4.77
=================================================================================================================================
Total investment return (a) N/A N/A N/A N/A N/A N/A
Net assets applicable to
Class A Preferred
Certificates, end of period $3,911,618 $5,422,117 $8,629,880 $10,534,185 $11,857,751 $13,941,968
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Class
B Certificates, end of period $15,448,324 $14,401,615 $12,816,146 $11,324,698 $10,039,426 $8,406,774
=================================================================================================================================
Ratios and Supplemental Data:
Ratio of operating expenses to average
net assets applicable to
Class B Certificates 107.84%(b)(c) 123.64%(b) 150.97%(b) 186.94%(b) 237.22%(b) 311.15%(b)
Ratio of net investment income
to average net assets applicable
to Class B Certificates 19.72%(c) 21.29% 25.54% 30.76% 40.16% 50.29%
Number of Class B Certificates
outstanding, end of period $1,763,800 $1,763,800 $1,763,800 $1,763,800 $1,763,800 $1,763,800
(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 operating expenses to average net
assets applicable to Class B Certificates was 4.92%(c), 4.68%, 5.43%,
6.54%, 7.28%, and 11.11% in 1998, 1997, 1996, 1995, 1994, and 1993,
respectively.
(c) Annualized.
See accompanying accountants' compilation
report and notes to financial statements.
7
</TABLE>
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
1. Organization and Business
College and University Facility Loan Trust Two (the Trust) was formed 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 Company, 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.
See accompanying accountants' compilation report.
8
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
1. Organization and Business (Continued)
All payments on the Loans and earnings under the investment agreements and any
required transfers from 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 Significant Accounting Policies
(a) College and University Facility Loans
The Loans were purchased and recorded at a discount 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 May 31, 1998 was approximately $74,892,000. As a result
of prepayments of Loans in the six months ended May 31, 1998, additional
interest income of approximately $496,000 was recognized.
See accompanying accountants' compilation report.
9
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
2. Summary of Significant Accounting Policies (Continued)
(a) College and University Facility Loans (Continued)
The Trust's policy is to discontinue the accrual of interest on Loans for
which payment of principal or interest is 180 days or more past due or for
other such Loans that management believes the 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 May 31, 1998, one loan has been placed on
nonaccrual status, as discussed in Note 6.
(b) Other Investments
Other investments, which are included in Investments in 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.
See accompanying accountants' compilation report.
10
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
2. Summary of Significant Accounting Policies (Continued)
(d) Deferred Bond Issuance Costs
Deferred Bond issuance costs are 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. When Loan prepayments occur, an
additional portion of the deferred issuance costs is expensed in the year
the prepayment occurred, 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.
The allowance for possible loan losses is based on 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.
See accompanying accountants' compilation report.
11
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
2. Summary of Significant Accounting Policies (Continued)
(e) Accounting for Impairment of a Loan and Allowance for Possible Loan
Losses (Continued)
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 of $2,360,468 has been reclassified as
paid-in capital as of November 30, 1997. This reclassification results 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.
The Trust expects to have a tax return of capital for the fiscal year
ending November 30, 1998; however, the amount cannot be reasonably
estimated at May 31, 1998. Therefore, the current period net increase in
net assets of $1,371,539 has been included in the accumulated deficit.
See accompanying accountants' compilation report.
12
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
2. Summary of Significant Accounting Policies (Continued)
(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 May 31, 1998 consist of the following:
<TABLE>
<CAPTION>
Outstanding Unamortized
Interest Stated Principal Discount Carrying Value
Type Rate Maturity (000s) (000s) (000s)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
Sequential 4.00% June 1, 2002 $56,675 $3,008 $53,667
Sequential 4.00 June 1, 2018 149,370 44,945 104,425
- ---------------------------------------------------------------------------------------------------------------
$206,045 $47,953 $158,092
===============================================================================================================
</TABLE>
Interest on the Bonds is payable semiannually. On June 1, 1998, the Trust made a
principal payment of $9,411,028 on the 4%, June 1, 2002 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 Amount, as defined within the Indenture. These 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.
See accompanying accountants' compilation report.
13
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
3. Bonds (Continued)
The estimated aggregate principal payments on the Bonds at May 31, 1998 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)
================================================================================
1998 $10,689
1999 21,055
2000 19,838
2001 18,618
2002 18,641
Thereafter 117,204
- --------------------------------------------------------------------------------
Total $206,045
================================================================================
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.
See accompanying accountants' compilation report.
14
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
4. Administrative Agreements
(a) Servicer
As compensation for the services provided under the servicing agreement,
GMAC Commercial Mortgage Corporation (GMAC) receives a collection fee. The
fee is paid each date payments are received on each Loan and is equal to
.075 of 1% of the outstanding principal balance of each Loan divided by the
number of payments of principal and interest in a calendar year. For the
period ended May 31, 1998, GMAC's fees totaled $106,817. GMAC was also
reimbursed for related expenses of $7,235.
(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 $7,500 and $6,250, respectively, for
the six months ended May 31, 1998. In addition, the Owner Trustee, in
its capacity as manager, was reimbursed $125 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 Bond
Trustee is also reimbursed for out-of-pocket expenses in an amount not
to exceed 4% of the applicable annual fee. For the six months ended
May 31, 1998, Bond Trustee fees were $15,153. In addition, the Bond
Trustee was reimbursed $618 for out-of-pocket expenses.
See accompanying accountants' compilation report.
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 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.
See accompanying accountants' compilation report.
16
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
5. Certificates (Continued)
On June 2, 1998, the Trust paid $1,835,329 to the holders of Class A Preferred
certificates, of which $324,830 was for payment of dividends and $1,510,499 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.
6. Allowance For Possible Loan Losses
An analysis of the allowance for possible loan losses for the six months ended
May 31, 1998 is summarized as follows:
Balance, beginning of period $1,032,376
Provision 100,000
Charge-off --
- --------------------------------------------------------------------------------
Balance, end of period $1,132,376
================================================================================
At May 31, 1998, the recorded investment in loans that are considered to be
impaired under SFAS 114 was approximately $1,000 with a related allowance for
possible loan losses of $200.
The average recorded investment in impaired loans during the six months ended
May 31, 1998 was approximately $2,000. For the six months ended May 31, 1998,
approximately $13,000 of interest income was recognized on impaired loans.
The amortized cost of the Loan placed on nonaccrual status is approximately
$1,000 at May 31, 1998. See "Accounting for Impairment of a Loan and Allowance
for Possible Loan Losses" for a discussion of the Trust's impaired loan
accounting policy.
See accompanying accountants' compilation report.
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 May 31, 1998,
excluding payments for Loans in Default, as defined in the Indenture, are as
follows:
Principal Interest
Payments Payments Total
Fiscal year (000s) (000s) (000s)
================================================================================
1998 $ 13,954 $ 3,754 $ 17,708
1999 23,305 6,898 30,203
2000 21,821 6,152 27,973
2001 20,398 5,447 25,845
2002 19,810 4,763 24,573
Thereafter 136,334 28,466 164,800
- --------------------------------------------------------------------------------
Total $235,622 $55,480 $291,102
================================================================================
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 May 31, 1998:
Amortized
Number Cost
Type of Collateral of Loans (000s) %
================================================================================
Loans secured by a
first mortgage 296 $ 86,062 53.5%
Loans not secured by
a first mortgage 185 74,682 46.5
- --------------------------------------------------------------------------------
Total Loans 481 $160,744 100.0%
================================================================================
See accompanying accountants' compilation report.
18
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
7. Loans (Continued)
Amortized
Number Cost
Type of Institution of Loans (000s) %
================================================================================
Private 304 $ 86,456 53.8%
Public 177 74,288 46.2
- --------------------------------------------------------------------------------
Total Loans 481 $160,744 100.0%
================================================================================
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.
A number of borrowers are currently experiencing financial difficulties due to
declining enrollment, increasing costs and a decline in endowments, grants,
private gifts, and State and Federal funding. Many
See accompanying accountants' compilation report.
19
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
7. Loans (Continued)
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 of Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," allows
for the use of a wide 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.
Current market prices are not available for most of the Trust's financial
instruments since an active market generally does not exist for such
instruments. 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.
See accompanying accountants' compilation report.
20
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
8. Fair Value of Financial Instruments (Continued)
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 May
31, 1998 is as follows:
Book Value Fair Value
(000s) (000s)
================================================================================
Loans $159,612 * $ 194,474
Investment Agreements:
Revenue Fund 17,102 18,278
Liquidity Fund 4,542 5,339
- --------------------------------------------------------------------------------
$181,256 $ 218,091
================================================================================
Bonds $158,092 $ 185,667
================================================================================
* Net of Allowance for Possible Loan Losses of $1,132,000.
See accompanying accountants' compilation report.
21
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
May 31, 1998
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Outstanding Stated Internal Amortized
Principal Interest Maturity Rate of Cost (Notes
Balance Description Rate % Date Return % 1 and 2)
- ------------ ---------------------------------------------------- ---------- ------------ -------- ------------
COLLEGE AND UNIVERSITY LOANS (88.1%)
------------------------------------
-------------- A --------------
<S> <C> <C> <C> <C>
$555 Alabama Agricultural and Mechanical University 3.000-3.750 07/01/2005 10.25 $427
1,950 Alabama Agricultural and Mechanical University 3.000 05/01/2018 10.27 1,094
160 Albion College 3.000 10/01/2009 10.56 108
573 Albright College 3.000 11/01/2015 10.23 346
30 Alcorn State University 2.875 11/01/1999 10.11 28
36 Alcorn State University 3.500 11/01/2002 10.15 31
50 Allegheny College 3.000 07/01/2015 10.38 21
10 Allentown College of St. Francis De Sales 3.000 11/01/1998 10.98 9
260 Alma College 3.750 04/01/2002 11.52 219
82 American International College 3.375 10/01/2002 10.84 70
114 Anderson University 3.500 03/01/2003 11.42 91
260 Anderson University 3.000 03/01/2006 11.19 187
67 Appalachian State University 3.500 07/01/2001 10.28 58
420 Arizona State University 3.125 09/01/2001 10.17 366
310 Arizona State University 3.375 10/01/2002 10.16 264
1,230 Arizona State University 3.000 04/01/2006 10.60 908
156 Arkansas State University 3.500 04/01/2001 10.97 137
148 Arkansas State University 3.375 10/01/2000 10.25 137
673 Arkansas State University 3.750 04/01/2005 10.75 524
26 Arkansas Technical University 2.875 10/01/1999 10.21 24
2,255 Auburn University 3.000 12/01/2018 9.16 1,321
220 Azusa Pacific University 3.750 04/01/2015 10.88 133
-------------- B --------------
225 Ball State University 3.000 07/01/1999 9.98 208
1,105 Baptist College at Charleston 3.000 03/01/2019 10.73 580
717 Baptist College at Charleston 3.000 03/01/2011 10.98 452
10 Bard College 2.750 10/01/1998 11.40 10
217 Becker Junior College 3.000 04/01/2005 11.21 162
113 Bellarmine College 3.625 05/01/2004 11.34 90
16 Belmont Abbey College 3.000 11/01/1998 10.96 15
9 Benedict College 2.875 02/01/1999 11.83 8
145 Benedict College 3.750 11/01/2004 10.75 116
995 Benedict College 3.000 11/01/2006 10.61 742
1,913 Benedict College 3.000 11/01/2020 10.36 1,019
1,905 Bentley College 3.000 11/01/2007 10.57 1,368
331 Bethany College 3.375 11/01/2012 10.54 217
295 Bethany College 3.000 11/01/2017 10.40 165
565 Bethany College 3.000 11/01/2012 10.40 357
20 Bethune-Cookman College 3.000 11/01/2002 10.74 17
207 Boston Architectural Center 3.750 11/01/2004 10.77 168
See accompanying accountants' compilation report and notes to financial
statements.
22
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
May 31, 1998
(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)
- ------------ ---------------------------------------------------- ---------- ------------ -------- ------------
<S> <C> <C> <C> <C>
$175 Bradford College 3.375 10/01/2001 10.85 $151
311 Brandeis University 3.000 11/01/2011 10.64 199
155 Brevard College 3.000 11/01/2004 10.71 124
79 Brevard College 3.000 05/01/2006 11.12 57
126 Bryan College 3.500 04/01/2003 11.39 101
18 Buena Vista College 3.500 02/01/2000 11.85 16
122 Buena Vista College 3.000 02/01/2006 11.23 88
-------------- C --------------
1,130 California Polytechnic State University 3.000 11/01/2006 10.05 831
385 California State University 3.000 11/01/2006 8.75 305
1,335 California State University 3.000 11/01/2013 8.93 900
2,763 California State University 3.000 11/01/2019 8.99 1,655
146 Calvin College 3.000 11/01/2000 10.83 130
2,445 Cameron University 3.000 04/01/2007 10.16 1,777
215 Canisius College 3.375 05/01/2002 11.48 182
1,670 Canisius College 3.000 11/01/2017 10.40 940
116 Canisius College 3.000 11/01/1999 10.89 107
30 Carnegie-Mellon University 3.000 05/01/1999 11.37 28
250 Carnegie-Mellon University 3.500 11/01/2001 10.52 219
290 Carnegie-Mellon University 3.000 05/01/2009 10.73 195
1,060 Carnegie-Mellon University 3.000 11/01/2017 10.51 594
165 Carroll College 3.125 06/01/2000 10.75 146
376 Carroll College 3.750 06/01/2014 10.46 236
175 Carroll College 3.000 06/01/2018 10.15 97
452 Carroll College 3.750 03/01/2015 10.93 272
250 Case Western Reserve University 3.500 04/01/2003 11.39 200
269 Catawba College 3.000 12/01/2009 10.27 174
114 Central Missouri State University 3.125 07/01/2000 10.24 102
266 Central Missouri State University 3.375 07/01/2001 10.27 233
669 Central Missouri State University 3.625 07/01/2004 10.29 537
1,090 Central Missouri State University 3.000 07/01/2007 10.18 789
11 Central Texas College 3.000 11/01/1998 10.14 11
171 Champlain College 3.000 12/01/2013 10.19 104
600 Chapman College 3.000 10/01/2013 10.65 362
392 Chapman College 3.000 11/01/2005 10.63 298
257 Chapman College 3.000 11/01/2007 10.57 185
1,700 Chateau Community Housing Association 3.000 10/01/2012 10.51 1,067
80 Cisco Junior College 3.000 11/01/2005 10.04 63
110 Cisco Junior College 3.000 07/01/2005 10.15 79
27 Claflin College 3.125 04/01/2001 11.59 23
450 Clemson University 3.000 07/01/2005 9.51 356
157 Coker College 3.000 12/01/2009 10.04 105
See accompanying accountants' compilation report and notes to financial
statements.
23
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
May 31, 1998
(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)
- ------------ ---------------------------------------------------- ---------- ------------ -------- ------------
<S> <C> <C> <C> <C>
$107 College of Notre Dame of Maryland 3.375 11/01/2002 10.48 $91
256 College of Our Lady of the Elms 3.375 10/01/2001 10.86 223
950 College of Saint Rose 3.000 05/01/2022 10.43 488
596 College of Saint Thomas 3.000 11/01/2009 10.53 406
67 College of Santa Fe 3.500 10/01/2001 10.86 58
249 College of Santa Fe 3.000 10/01/2005 10.66 190
639 College of Santa Fe 3.000 10/01/2018 10.43 355
90 College of the Holy Cross 3.500 10/01/1999 11.03 86
1,115 College of the Holy Cross 3.625 10/01/2013 10.60 721
895 College of the Holy Cross 3.000 10/01/2006 10.63 660
44 College of the Virgin Islands 3.000 11/01/2002 10.15 37
102 College of the Virgin Islands 3.000 10/01/2003 10.16 83
281 Columbia College 3.625 07/01/2004 10.90 221
90 Columbia College 3.000 07/01/2006 10.80 66
150 Concordia College 3.000 04/01/2009 11.05 102
755 Concordia College 3.000 05/01/2019 10.65 399
107 Connecticut College 3.000 11/01/1999 10.89 99
72 Cornell College 3.000 10/01/2005 10.66 55
348 Cumberland University 3.000 08/01/2017 10.52 195
-------------- D --------------
73 Daemen College 3.125 04/01/2000 11.68 65
655 Daemen College 3.000 04/01/2016 10.77 369
201 Dakota Wesleyan University 3.000 10/01/2015 10.46 118
285 Dana College 3.000 04/01/2005 11.22 211
65 Dana College 3.500 04/01/2003 11.39 52
110 Dean Academy & Jr. College 3.500 10/01/1999 10.97 102
143 Dickinson College 3.000 05/01/2018 10.30 81
271 Dillard University 3.000 04/01/2008 11.09 189
111 Doane College 3.000 11/01/2000 10.83 99
575 Dormitory Authority State of NY (New York University) 3.000 07/01/2000 8.95 522
667 Dowling College 3.000 10/01/2010 10.75 436
97 Drexel University 2.875 05/01/2001 11.57 85
1,220 Drexel University 3.500 05/01/2014 10.53 739
15 Drury College 3.125 10/01/1999 11.32 14
301 Drury College 3.000 04/01/2015 10.63 178
538 Drury College 3.000 10/01/2010 10.75 352
1,127 D'Youville College 3.000 04/01/2018 10.90 601
-------------- E --------------
126 East Texas State University 2.875 09/01/1999 8.94 118
1,376 East Texas State University 3.500 03/01/2002 9.48 1,128
1,679 East Texas State University 3.000 03/01/2002 9.60 1,338
123 East Texas State University 3.000 11/01/2000 9.26 112
See accompanying accountants' compilation report and notes to financial
statements.
24
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
May 31, 1998
(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)
- ------------ ---------------------------------------------------- ---------- ------------ -------- ------------
<S> <C> <C> <C> <C>
$49 Eastern Oklahoma State College 3.125 05/15/1999 9.96 $46
430 Elizabeth City State University 3.000 10/01/2017 10.02 255
545 Embry-Riddle Aeronautical University 3.000 09/01/2007 10.64 388
175 Emmanuel College 3.000 11/01/2013 10.45 107
169 Emory University 2.875 09/01/1998 11.00 161
-------------- F --------------
56 Fairleigh Dickinson University 3.125 11/01/1999 10.93 52
1,780 Fairleigh Dickinson University 3.000 11/01/2017 10.39 1,006
7 Findlay College 2.750 07/01/1998 11.04 7
245 Florida Agricultural and Mechanical University 3.625 07/01/2004 10.29 196
258 Florida Atlantic University 3.500 07/01/2004 10.27 220
395 Florida Atlantic University 3.000 07/01/2006 10.18 282
212 Florida Institute of Technology 3.000 11/01/2009 10.53 147
63 Florida Southern College 3.000 11/01/1999 10.89 58
54 Florida State University 3.000 01/01/1999 9.20 50
246 Florida State University 3.500 06/01/2001 8.44 221
775 Florida State University 3.000 01/01/2009 9.40 559
58 Fort Hays State University 3.500 10/01/2001 10.19 52
133 Fort Hays State University 3.625 10/01/2002 10.18 114
185 Fort Hays State University 3.000 10/01/2007 10.08 135
640 Fort Lewis College 3.000 10/01/2006 10.09 481
-------------- G --------------
790 Gannon University 3.000 11/01/2011 10.49 511
213 Gannon University 3.000 12/01/2022 10.13 109
87 Gavilan College 3.000 04/01/2006 10.59 64
75 George Fox College 3.500 04/01/2001 11.25 65
824 George Fox College 3.000 07/01/2018 10.64 448
126 George Washington University 3.500 05/01/2000 11.30 113
928 George Washington University 3.500 11/01/2002 10.50 800
38 George Washington University 3.000 11/01/1998 10.58 37
55 Georgetown College 3.000 12/01/1999 10.02 49
546 Georgetown College 3.000 12/01/2008 10.04 376
955 Georgetown College 3.000 12/01/2009 10.05 639
2,996 Georgetown University 3.000 11/01/2020 10.36 1,595
7,595 Georgetown University 4.000 11/01/2020 10.52 4,415
1,342 Georgetown University 3.000 05/01/2005 10.86 1,028
697 Georgia Education Authority Board of Regents
of the University System of Georgia 3.375 01/01/2003 10.60 570
13 Grambling State University 3.000 11/01/1999 10.12 12
126 Grambling State University 3.000 11/01/2000 10.11 114
See accompanying accountants' compilation report and notes to financial
statements.
25
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
May 31, 1998
(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)
- ------------ ---------------------------------------------------- ---------- ------------ -------- ------------
-------------- H --------------
<S> <C> <C> <C> <C>
$417 Hampshire College 3.000 07/01/2013 10.75 $250
1,493 Hampshire College 3.000 02/01/2014 10.70 889
240 Harcum Junior College 3.375 11/01/2002 10.77 202
755 Harper Grace Hospital 3.625 04/01/2005 11.26 573
49 Henderson State University 3.125 04/01/1999 11.06 45
165 Hesston College 3.000 04/01/2006 11.14 119
354 High Point College 3.000 12/01/2010 10.26 223
2,079 Hinds Junior College 3.000 04/01/2013 10.42 1,302
106 Hiwassee College 3.375 01/01/2003 11.58 86
210 Hiwassee College 3.000 09/15/2018 10.58 114
2,170 Hofstra University 3.000 11/01/2012 10.61 1,356
314 Hood College 3.625 11/01/2014 10.54 199
425 Houston Tillotson College 3.500 04/01/2014 10.90 261
60 Huntingdon College 3.500 03/01/2002 11.54 50
295 Huntingdon College 3.000 10/01/2008 10.60 206
-------------- I --------------
34 Illinois Benedictine College 3.000 10/01/1998 10.98 33
218 Illinois Institute of Technology 3.000 03/01/2003 11.10 177
42 Indiana University 2.875 04/01/1999 10.08 39
402 Indiana University 3.375 04/01/2001 10.06 354
880 Indiana University 3.500 04/01/2001 10.06 774
1,468 Indiana University 3.750 12/01/2003 8.84 1,244
380 Indiana University 3.000 07/01/1999 9.31 353
139 Inter American University of Puerto Rico 3.000 09/01/2007 10.66 101
2,621 Inter American University of Puerto Rico 3.000 01/01/2017 10.94 1,447
-------------- J --------------
1,915 James Madison University 3.000 06/01/2009 10.49 1,292
29 John Brown University 2.875 04/01/2000 11.64 26
422 Johnson & Wales College 3.000 11/01/2013 10.59 258
235 Johnson C. Smith University 3.000 05/01/2005 11.18 175
35 Judson College 3.750 07/01/2004 10.92 28
-------------- K --------------
241 Kansas State University 3.375 10/01/2002 9.12 211
775 Kansas State University 3.625 04/01/2004 9.77 617
114 Kendall College 3.375 10/01/2002 10.82 96
266 Kendall College 3.000 10/01/2008 10.59 185
426 Kent State University 3.500 12/01/2000 8.90 380
370 Knox College 3.000 04/01/2006 11.15 267
-------------- L --------------
335 LaGrange College 3.000 03/01/2009 11.06 221
235 Lamar University 3.500 04/01/2003 10.76 192
See accompanying accountants' compilation report and notes to financial
statements.
26
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
May 31, 1998
(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)
- ------------ ---------------------------------------------------- ---------- ------------ -------- ------------
<S> <C> <C> <C> <C>
$379 Langston University 3.375 10/01/2003 10.15 $314
1,105 Langston University 3.000 04/01/2007 10.56 790
484 Lassen Junior College District 3.000 04/01/2020 10.27 259
1,415 Leland Stanford Junior College 3.375 05/01/2003 11.33 1,136
204 Lenoir Rhyne College 3.000 12/01/2006 10.04 148
88 Linfield College 3.000 10/01/2017 10.44 49
86 Long Island University 3.000 10/01/1998 11.00 82
802 Long Island University 3.750 05/01/2005 11.22 614
235 Long Island University 3.000 11/01/2009 10.69 159
823 Long Island University 3.000 11/01/2009 10.69 555
419 Long Island University 3.750 04/01/2003 11.41 339
595 Long Island University 3.625 06/01/2014 10.49 370
130 Long Island University 3.750 10/01/2004 10.79 104
423 Louisiana State University 3.500 07/01/2001 8.65 382
1,116 Louisiana State University 3.625 07/01/2004 9.04 928
448 Louisiana State University 3.000 07/01/2005 8.84 363
395 Louisiana State University 3.000 07/01/2006 8.87 314
57 Louisiana State University 3.000 05/01/1999 9.17 54
336 Louisiana State University 3.000 07/01/2001 8.62 299
42 Loyola University 3.000 11/01/1998 10.96 40
172 Lycoming College 3.500 05/01/2001 11.22 150
254 Lycoming College 3.625 05/01/2014 10.64 158
340 Lycoming College 3.750 05/01/2015 10.62 209
528 Lynchburg College 3.750 05/01/2015 10.64 329
675 Lynchburg College 3.000 05/01/2018 10.68 367
-------------- M --------------
500 MacAlester College 3.375 05/01/2002 11.41 414
468 MacAlester College 3.000 05/01/2020 10.46 251
20 Madison General Hospital 3.000 12/01/1999 9.67 18
585 Marian College 3.000 10/01/2016 10.45 337
38 Marian College 3.000 11/01/1999 10.89 35
33 Marist College 3.500 04/01/2000 11.73 30
97 Marquette University 3.000 07/31/2024 10.59 47
23 Mary Baldwin College 2.875 11/01/1999 10.94 22
443 Mary Baldwin College 3.375 05/01/2012 10.68 285
660 Marymount University 3.000 05/01/2016 10.52 378
870 McLennan Community College 3.000 04/01/2006 10.49 645
88 McNeese State University 3.500 10/01/2001 10.18 77
1,074 Memorial Hospital for Cancer and Allied Diseases 3.375 04/01/2012 10.68 691
86 Menlo College 3.125 04/01/2001 11.53 73
513 Mercer University 3.000 05/01/2014 10.58 309
1,590 Mercy College of Detroit 3.625 10/01/2013 10.59 1,012
See accompanying accountants' compilation report and notes to financial
statements.
27
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
May 31, 1998
(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)
- ------------ ---------------------------------------------------- ---------- ------------ -------- ------------
<S> <C> <C> <C> <C>
$14 Mercy Hospital (A) 3.000 10/01/1998 10.98 $1
43 Merrimack College 3.000 04/15/2019 10.53 30
127 Merrimack College 3.000 04/15/2008 10.79 69
86 Middlebury College 3.375 10/01/2002 11.12 72
105 Midland Lutheran College 3.000 04/01/2005 11.20 78
20 Midland Lutheran College 3.000 10/01/1998 10.98 19
612 Millsaps College 3.000 11/01/2021 10.34 320
56 Mississippi State University 2.875 01/01/2000 10.99 49
1,630 Mississippi State University 3.000 12/01/2020 9.64 894
105 Mississippi Valley State University 3.500 07/01/2001 10.28 91
117 Molloy College 3.375 10/01/2002 10.81 98
8 Montreat-Anderson College 3.000 11/01/1998 10.96 8
246 Moravian College 3.375 11/01/2012 10.52 159
775 Morehouse College 3.000 07/01/2010 10.50 466
2,400 Morgan State University 3.000 11/01/2014 10.56 1,432
216 Morris Brown College 3.750 05/01/2007 11.12 156
1,998 Morris Brown College 2.750-3.750 05/01/2018 10.89 1,195
677 Morris College 3.000 11/01/2009 10.53 461
99 Muhlenberg College 3.000 11/01/2000 10.50 89
-------------- N --------------
164 New England College 3.000 04/01/2016 10.77 92
695 Newark Beth Israel Hospital 3.625 01/01/2014 11.06 420
74 NIACC Dormitories, Inc. 3.000 10/01/2012 10.27 47
72 Nicholls State University 3.000 09/01/1999 8.88 68
2,968 Norfolk State University 3.000 12/01/2021 9.77 1,589
667 North Carolina Agricultural and
Technical State University 3.000 05/01/2014 10.34 403
660 North Carolina State University 3.625 09/01/2004 7.97 570
295 North Carolina State University 3.125 09/01/2001 7.58 270
350 North Carolina State University 3.500 09/01/2001 7.63 321
171 North Greenville College 3.000 11/01/2003 10.72 141
196 Northeast Louisiana University 3.500 04/01/2001 10.28 173
388 Northeast Missouri State University 3.375-3.500 05/01/2002 10.75 328
73 Northeastern Oklahoma State University 3.000 06/01/1998 9.73 70
3,207 Northeastern University 3.000 05/01/2018 10.53 1,771
145 Northeastern University 3.000 05/01/2004 10.97 115
75 Northwestern State University 3.125 10/01/2000 10.15 68
425 Nova University 3.000 12/01/2007 10.04 301
-------------- O -------------
294 Occidental College 3.000 10/01/2019 10.41 159
245 Olympic Community College 3.000 10/01/2008 10.07 174
See accompanying accountants' compilation report and notes to financial
statements.
28
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
May 31, 1998
(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)
- ------------ ---------------------------------------------------- ---------- ------------ -------- ------------
<S> <C> <C> <C> <C>
$55 Ouachita Baptist University 3.125 12/01/1999 10.03 $49
34 Ouachita Baptist University 3.000 12/01/2006 10.04 25
-------------- P -------------
14 Pacific University 3.000 11/01/1999 10.89 13
1,001 Paine College 3.000 10/01/2016 10.45 575
16 Pan American University 3.000 10/01/1999 9.23 15
2,516 Philadelphia College of Art 3.000 01/01/2022 10.62 1,266
705 Pine Manor College 3.625 10/01/2003 10.80 576
7 Point Loma Nazarene College 2.875 04/01/1999 11.85 6
185 Polytechnic University 3.375 10/01/2011 10.59 122
215 Post College 3.000 04/01/2010 10.76 142
1,295 Purdue University 3.625 07/01/2004 9.33 1,065
373 Purdue University 3.000 07/01/2005 9.26 298
-------------- Q -------------
25 Queens College 3.000 07/01/1998 11.07 24
53 Queens College 3.500 11/01/2001 10.88 48
177 Queens College 3.625 07/01/2004 10.90 139
-------------- R -------------
330 Randolph-Macon College 3.000 05/01/2010 10.72 220
285 Randolph-Macon College 3.000 11/01/2000 10.50 256
570 Regis College (Denver) 3.000 11/01/2012 10.47 358
154 Regis College (Weston) 3.375 10/01/2002 10.85 133
260 Rhode Island College 3.000 10/01/2005 10.09 201
105 Rider College 3.500 05/01/2001 11.57 92
248 Rider College 3.375 05/01/2002 11.44 207
102 Rider College 3.125 11/01/2000 10.86 92
1,900 Rider College 3.625 11/01/2013 10.42 1,202
462 Rider College 3.000 05/01/2017 10.70 256
112 Rio Grande College 3.000 03/30/2009 10.93 77
53 Roberts Wesleyan College 3.000 11/01/2000 10.83 47
171 Roger Williams College 3.000 11/01/1999 10.89 158
41 Russell Sage College 3.000 10/01/1998 10.98 39
100 Rutgers, The State University 2.750 05/01/1999 8.84 94
705 Rutgers, The State University 3.750 05/01/2016 9.19 468
10 Rutgers, The State University 2.875 05/01/1999 8.80 9
470 Rutgers, The State University 3.125 05/01/2001 8.89 431
-------------- S -------------
146 Saint Ambrose University 3.000 11/01/2001 10.78 126
145 Saint Anselm College 3.375 10/01/2001 10.88 127
24 Saint Edward's University 3.125 04/01/2000 11.69 22
117 Saint John's University 3.000 10/01/2002 10.76 97
175 Saint Joseph Hospital 3.500 10/01/2001 10.87 156
See accompanying accountants' compilation report and notes to financial
statements.
29
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
May 31, 1998
(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)
- ------------ ---------------------------------------------------- ---------- ------------ -------- ------------
<S> <C> <C> <C> <C>
$202 Saint Louis College of Pharmacy 3.375 10/01/2004 10.74 $160
86 Saint Louis University 3.125 10/01/2000 10.90 77
489 Saint Louis University 3.500 11/01/2002 10.80 415
114 Saint Mary's College 3.000 03/01/2005 11.25 84
445 Saint Mary's College 3.000 06/01/2020 10.14 240
23 Saint Mary's University of San Antonio 3.000 10/01/1998 10.98 22
2,086 Saint Michael's College 3.000 05/01/2013 10.60 1,288
256 Saint Norbert College 3.375 04/01/2002 11.52 216
228 Saint Norbert College 3.625 04/01/2004 11.33 178
408 Saint Norbert College 3.000 04/01/2007 11.10 287
524 Saint Paul's College 3.000 11/01/2014 10.56 313
60 Saint Peter's College 3.000 05/01/1999 11.70 55
670 Saint Vincent College 3.500 05/01/2013 10.86 417
350 Sam Houston State University 3.500 10/01/2001 9.10 314
1,015 San Diego State University 3.000 11/01/2007 10.04 765
1,295 Sangamon State University 3.000 11/01/2018 10.12 744
405 Seattle University 3.500 11/01/2001 10.84 355
570 Seattle University 3.000 11/01/2008 10.55 398
320 Seton Hall University 3.000 11/01/2000 10.83 281
360 Seton Hill College 3.625 11/01/2014 10.53 226
24 Sierra College 3.375 04/01/2002 10.87 21
342 Simpson College 3.000 07/01/2016 10.58 193
412 South Dakota School of Mines and Technology 3.000 04/01/2018 10.30 228
287 South Dakota School of Mines and Technology 3.625 04/01/2002 10.85 245
38 South Plains College 3.500 10/01/2002 10.18 32
96 South Plains College 3.625 10/01/2004 10.17 78
67 South Plains College 3.000 10/01/2005 10.10 53
430 Southeast Missouri State University 3.500 04/01/2002 10.82 361
1,246 Southeast Missouri State University 3.000 04/01/2007 10.58 905
795 Southeastern Oklahoma State University 3.000 04/01/2009 10.51 542
172 Southern Arkansas University 3.500 10/01/2002 10.23 147
614 Southern Methodist University 3.000 10/01/2007 10.61 439
256 Southern Nazarene University 3.750 04/01/2005 11.27 195
795 Southwest Missouri State College 3.375 10/01/2002 10.17 686
2,520 Southwest Texas State University 3.000 10/01/2015 9.51 1,566
20 Southwestern Christian College 3.000 11/01/2000 10.83 18
46 Spalding University 3.125 09/01/2000 10.95 42
411 Spalding University 3.000 09/01/2007 10.66 299
36 Springfield College 3.500 11/01/1999 10.60 34
32 Springfield College 3.125 05/01/2000 11.29 29
503 Springfield College 3.500 05/01/2013 10.67 323
93 Springfield College 3.000 05/15/2005 10.11 73
See accompanying accountants' compilation report and notes to financial
statements.
30
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
May 31, 1998
(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)
- ------------ ---------------------------------------------------- ---------- ------------ -------- ------------
<S> <C> <C> <C> <C>
$215 State Center Community College 3.000 10/01/2004 10.10 $172
52 Stephen F. Austin State University 2.875 10/01/1999 9.23 49
2,127 Stephen F. Austin State University 3.375-3.500 10/01/2012 9.57 1,448
203 Stetson University 3.000 01/01/2006 11.25 144
153 Stillman College 3.750 02/01/2004 11.42 119
393 Stonehill College 3.000 10/01/2006 10.64 290
28 Stonehill College 3.000 11/01/1998 10.96 27
175 SUNY, Mohawk Valley Community College 3.000 04/01/2005 10.26 116
69 Susquehanna University 3.125 05/01/2000 11.27 61
746 Syracuse University 3.000 05/01/2008 10.74 524
-------------- T -------------
60 Talladega College 3.375 12/01/2001 10.08 51
446 Talladega College 3.000 12/01/2012 10.24 279
299 Taylor University 3.000 10/01/2012 10.50 187
906 Taylor University 3.000 10/01/2013 10.49 557
46 Temple University 3.125 03/01/1999 10.70 42
132 Tennessee State University 3.375 01/01/1999 11.10 121
756 Texas A & I University 3.000 07/01/2009 9.57 534
40 Texas A & I University 3.000 06/01/1998 9.10 38
140 Texas Southern University 3.500 04/01/2001 10.89 122
525 Texas Southern University 3.500 04/01/2013 10.45 333
515 Transylvania University 3.000 11/01/2010 10.51 341
930 Trinity University 3.625 09/01/2004 10.82 736
402 Tufts University 3.375 10/01/2001 10.87 351
2,444 Tufts University 3.000 10/01/2021 10.39 1,271
95 Tulane University of Louisiana 3.000 10/01/1998 8.74 92
750 Tulane University of Louisiana 3.500 10/01/2001 9.06 670
-------------- U -------------
54 Union College 3.000 11/01/2002 10.74 45
2,105 University of Alabama in Birmingham 3.000 11/01/2008 7.97 1,647
67 University of Alabama in Huntsville 3.000 05/01/1999 10.05 62
84 University of Alaska 3.500 04/01/2000 10.94 76
178 University of Alaska 3.375 04/01/2002 10.82 150
436 University of Alaska 3.500 04/01/2003 10.80 365
195 University of Alaska 3.000 10/01/1999 10.22 181
253 University of Arizona 3.500 04/01/2003 10.82 212
126 University of Arkansas at Little Rock 3.500 04/01/2001 10.04 111
200 University of Arkansas at Little Rock 3.000 11/01/2009 9.42 146
508 University of Central Arkansas 3.000 04/01/2005 10.69 384
585 University of Central Florida 3.000 10/01/2007 10.08 427
290 University of Chicago 3.500 12/01/2001 10.10 245
93 University of Chicago 3.375 12/01/2001 10.08 78
See accompanying accountants' compilation report and notes to financial
statements.
31
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
May 31, 1998
(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)
- ------------ ---------------------------------------------------- ---------- ------------ -------- ------------
<S> <C> <C> <C> <C>
$36 University of Chicago 3.500 12/01/2002 10.11 $30
150 University of Delaware 3.125 11/01/2000 8.84 138
223 University of Delaware 3.375 11/01/2000 8.81 210
1,380 University of Delaware 3.000 11/01/2006 9.08 1,079
719 University of Delaware 3.000 12/01/2018 8.81 437
2,455 University of Florida 3.000 07/01/2014 10.15 1,494
172 University of Hartford 3.000 11/01/2001 10.78 148
54 University of Hawaii at Manoa 2.875 10/01/1999 10.13 50
78 University of Hawaii at Manoa 3.500 10/01/2001 10.18 69
60 University of Lowell 3.000 11/01/2000 7.62 56
2,700 University of Michigan 3.750 10/01/2005 9.51 2,186
90 University of Michigan 3.000 04/01/1999 10.08 84
823 University of Missouri 3.375 05/01/2002 10.03 723
115 University of Missouri 2.875 11/01/2000 9.25 105
105 University of Montevallo 3.125 11/01/2000 9.27 96
176 University of Nevada at Reno 3.000 11/01/1999 10.12 164
882 University of North Carolina 3.000 11/01/2005 8.81 720
635 University of North Carolina 3.000 01/01/2008 9.50 459
55 University of North Carolina 3.000 01/01/2007 9.50 41
1,064 University of Notre Dame 3.000 02/15/2019 10.62 573
840 University of Portland 3.375 04/01/2013 10.88 525
38 University of Portland 3.000 11/01/1998 10.98 36
37 University of Puerto Rico, Rio Piedras Campus 3.125 06/01/2000 9.17 34
1,939 University of Puerto Rico, Rio Piedras Campus 3.000 06/01/2011 9.39 1,314
48 University of Rhode Island 3.000 10/01/2001 9.68 42
13 University of Rochester 2.875 10/01/1998 11.04 12
693 University of Saint Thomas 3.000 10/01/2019 10.41 374
420 University of Santa Clara 3.125 04/01/2002 11.44 345
190 University of Santa Clara 3.375 04/01/2002 11.45 157
1,005 University of Santa Clara 3.625 04/01/2004 11.33 786
49 University of Scranton 3.125 11/01/2000 10.84 44
207 University of South Dakota 3.500 10/01/2001 9.59 184
1,015 University of South Florida 3.750 07/01/2005 10.30 794
357 University of Steubenville 3.125 04/01/2010 10.98 232
18 University of Tampa 2.875 11/01/1998 10.95 17
65 University of Texas at Arlington 3.000 07/01/1998 9.87 62
1,371 University of Vermont 3.000 07/01/2016 8.95 867
230 University of Vermont 3.375 07/01/2001 8.33 209
1,260 University of Vermont 3.000 07/01/2019 9.06 747
175 University of Washington 3.000 08/01/1999 8.82 164
320 University of Washington 3.500 08/01/2002 9.07 278
368 University of Washington 3.000 08/01/2003 9.06 308
See accompanying accountants' compilation report and notes to financial
statements.
32
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
May 31, 1998
(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)
- ------------ ---------------------------------------------------- ---------- ------------ -------- ------------
<S> <C> <C> <C> <C>
$1,625 University Student Co-Operative Association 3.000 04/01/2019 10.70 $857
142 Ursinus College 3.000 10/01/2000 10.86 126
568 Utica College 3.000 11/01/2009 10.53 386
-------------- V -------------
530 Vermont State College 3.000 06/01/2008 9.02 392
279 Vermont State College 3.000 07/01/2014 9.30 179
1,215 Villanova University 3.000 04/01/2019 10.70 643
3,980 Vincennes University 3.000 06/01/2023 9.02 2,207
2,842 Virginia Commonwealth University 3.000 06/01/2011 10.01 1,863
1,205 Virginia Commonwealth University 3.000 06/01/2004 10.08 950
378 Virginia Wesleyan College 3.000 11/01/2009 10.54 261
218 Virginia Wesleyan College 3.000 11/01/2010 10.51 144
-------------- W -------------
30 Waldorf College 3.125 07/01/2000 10.97 27
271 Waldorf College 3.000 07/01/2005 10.77 203
56 Wartburg College 3.500 10/01/2001 10.87 49
167 Wartburg College 3.750 04/01/2011 11.00 110
765 Washington State University 3.625 04/01/2004 10.02 621
495 Washington State University 3.750 04/01/2004 10.03 404
835 Washington State University 3.375 04/01/2003 10.02 692
25 Washington State University 3.000 04/01/1999 10.08 23
24 Washington University 3.000 10/01/1998 11.05 23
387 Washington University 3.500 10/01/2001 10.91 345
16 Wayne State University 3.000 04/01/2000 11.69 15
238 Wesley College 3.375 05/01/2013 10.88 150
72 West Kern Junior College District 3.625 04/01/2004 10.73 57
510 West Valley College 3.000 04/01/2009 10.50 347
96 West Virginia Wesleyan College 2.875 05/01/2000 11.56 85
477 West Virginia Wesleyan College 3.000 05/01/2015 10.75 275
419 Western Carolina University 3.625 05/01/2003 10.75 348
50 Western Washington University 3.125 10/01/1998 10.18 48
265 Western Washington University 3.500 10/01/2001 10.18 233
705 Western Washington University 3.625 10/01/2004 10.18 571
500 Western Washington University 3.750 10/01/2005 10.19 396
275 Westminster College of Salt Lake 3.000 11/01/2017 10.39 160
53 Westmoreland Hospital Association 3.500 07/01/2001 10.98 46
1 Wheaton College 2.875 04/01/1999 11.50 1
875 Wheaton College 3.500 04/01/2013 10.70 548
235 Wheeling College 3.500 05/01/2001 11.23 201
94 Wheeling College 3.000 11/01/2007 10.59 68
29 Wheelock College 3.000 05/01/2011 10.23 19
49 Wichita State University 3.000 10/01/2000 9.29 45
See accompanying accountants' compilation report and notes to financial
statements.
33
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
May 31, 1998
(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)
- ------------ ---------------------------------------------------- ---------- ------------ -------- ------------
<S> <C> <C> <C> <C>
$810 Wittenberg University 3.000 05/01/2015 10.76 $465
254 Wittenberg University 3.000 11/01/2017 10.39 143
53 Wooster Business College 3.000 03/30/2009 10.88 37
124 Worcester Polytechnic Institute 3.375 04/01/2001 11.57 107
699 Wright State University 3.000 05/01/2009 9.89 497
-------------- Y -------------
374 York Hospital 3.000 05/01/2020 10.64 196
- ---------- ----------
235,636 Total College and University Loans 160,744
- ---------- Allowance for Possible Loan Losses 1,132
----------
Net College and University Loans 159,612
----------
INVESTMENT AGREEMENTS (11.9%)
-----------------------------
Morgan Guaranty Trust Company -
4,542 Liquidity Fund 7.750 06/01/2018 7.750 4,542
Morgan Guaranty Trust Company -
17,102 Revenue Fund 7.050 06/01/2018 7.050 17,102
---------- ----------
21,644 Total Investment Agreements 21,644
---------- ----------
$257,280 Total Investments (100.0%) $181,256
========== ==========
(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
described in Note 6.
See accompanying accountants' compilation report and notes to financial
statements.
34
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains financial information extracted from the May 31, 1998
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> 6-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 181256
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 1713
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 860
<TOTAL-ASSETS> 183829
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 158091
<OTHER-ITEMS-LIABILITIES> 6378
<TOTAL-LIABILITIES> 164469
<SENIOR-EQUITY> 3912
<PAID-IN-CAPITAL-COMMON> 15448
<SHARES-COMMON-STOCK> 1763800
<SHARES-COMMON-PRIOR> 1763800
<ACCUMULATED-NII-CURRENT> (1394)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 19360
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9519
<OTHER-INCOME> 0
<EXPENSES-NET> 8047
<NET-INVESTMENT-INCOME> 1471
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1371
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 325
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (464)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 15079
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 7776
<GROSS-EXPENSE> 8048
<AVERAGE-NET-ASSETS> 19591
<PER-SHARE-NAV-BEGIN> 8.17
<PER-SHARE-NII> .83
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.18)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.76
<EXPENSE-RATIO> .41
<AVG-DEBT-OUTSTANDING> 163202
<AVG-DEBT-PER-SHARE> 92.53
</TABLE>
