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College and University
Facility Loan Trust Two
- --------------------------------------------------------------------------------
Financial Statements
November 30, 1997
<PAGE>
College and University
Facility Loan Trust Two
Balance Sheet
================================================================================
<TABLE>
<CAPTION>
November 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments, at amortized cost, net of allowance for possible loan
losses of $1,032,376 (Notes 1, 2, 6, 7 and 8 and Schedule of Investments) $191 580 587
Cash 402 468
Interest receivable 1 968 561
Deferred bond issuance costs (Note 2) 833 778
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 194 785 394
====================================================================================================================================
Liabilities
Bonds payable, net of unamortized discount (Notes 3 and 8) 168 312 479
Interest payable (Note 3) 4 397 040
Dividends payable (Note 5) 523 357
Payable for redemption of Class A Preferred Certificates (Note 5) 1 408 615
Accrued expenses and other liabilities 320 171
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 174 961 662
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
Class A Preferred Certificates, par value $1 - authorized and outstanding -
5,422,117 certificates (preference as to annual dividends of 13.65%,
mandatory redemption and liquidation at par value) (Note 5) 5 422 117
- ------------------------------------------------------------------------------------------------------------------------------------
Class B Certificates, par value $1 - authorized, issued
and outstanding - 1,763,800 certificates (Note 5) 1 763 800
Accumulated deficit (Note 2) (2 440 991)
Paid-in capital (Note 2) 15 078 806
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets applicable to Class B certificateholders 14 401 615
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets $ 19 823 732
====================================================================================================================================
Net asset value per Class B certificate
(based on 1,763,800 certificates outstanding) $8.17
====================================================================================================================================
The accompanying notes are an integral part of these financial statements.
3
</TABLE>
<PAGE>
College and University
Facility Loan Trust Two
Statement of Operations
================================================================================
<TABLE>
<CAPTION>
Year Ended November 30, 1997
====================================================================================================================================
<S> <C>
Investment income:
Interest income (Note 2) $19 723 691
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Interest expense (Notes 2 and 3) 16 333 530
Servicer fees (Note 4) 233 994
Trustee fees (Note 4) 64 886
Other trust and bond administration expenses 193 466
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 16 825 876
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 2 897 815
Provision for possible loan losses (Notes 2 and 6) (200 000)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2 697 815
Dividends to Class A Preferred Certificateholders (1 112 346)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Class B
certificateholders resulting from operations $ 1 585 469
====================================================================================================================================
The accompanying notes are an integral part of these financial statements.
4
</TABLE>
<PAGE>
College and University
Facility Loan Trust Two
Statement of Cash Flows
================================================================================
<TABLE>
<CAPTION>
Year Ended November 30, 1997
====================================================================================================================================
<S> <C>
Cash flows from operating activities:
Interest received $ 9 426 460
Interest paid (9 479 316)
Operating expenses paid (432 814)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used for operating activities (485 670)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Net decrease in funds held under investment agreements 2 088 295
Principal payments on Loans 26 993 686
Net cash provided by investing activities 29 081 981
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal repayments on Bonds (24 022 434)
Dividends on Class A Preferred certificates (1 261 559)
Redemptions of Class A Preferred certificates (3 023 769)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (28 307 762)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in cash 288 549
Cash, beginning of year 113 919
- ------------------------------------------------------------------------------------------------------------------------------------
Cash, end of year $ 402 468
====================================================================================================================================
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 $ 2 697 815
Provision for possible loan losses 200 000
Decrease in interest receivable 141 341
Increase in accrued expenses and other liabilities 59 532
Decrease in bond interest payable (480 449)
Amortization of original issue discount on Bonds 7 190 649
Amortization of purchase discount on Loans (10 438 572)
Amortization of deferred Bond issuance costs 144 014
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used for operating activities $ (485 670)
====================================================================================================================================
The accompanying notes are an integral part of these financial statements.
5
</TABLE>
<PAGE>
College and University
Facility Loan Trust Two
Statements of Changes in Net Assets
(Note 2 (f))
===============================================================================
<TABLE>
<CAPTION>
Years Ended November 30, 1997 1996
====================================================================================================================================
<S> <C> <C>
From operations:
Net investment income $ 2 897 815 $ 3 082 976
Provision for possible loan losses (200 000) (200 000)
Dividends to certificateholders (Notes 2 and 5):
Class A Preferred Certificateholders
($.1365 per certificate annually)
From net investment income -- --
As tax return of capital (1 112 346) (1 391 528)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Class B
certificateholders resulting from operations 1 585 469 1 491 448
- ------------------------------------------------------------------------------------------------------------------------------------
Capital certificate transactions (Note 5):
Redemptions of Class A Preferred certificates (3,229,372 and
1,904,305 certificates in 1997 and 1996, respectively) (3 229 372) (1 904 305)
Issuance of Class A Preferred certificates as paid-inkind dividend
(21,609 and 0 certificates in 1997 and 1996, respectively) 21 609 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from
capital certificate transactions (3 207 763) (1 904 305)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets (1 622 294) (412 857)
Net assets:
Beginning of year 21 446 026 21 858 883
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $19 823 732 $21 446 026
====================================================================================================================================
The accompanying notes are an integral part of these 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>
Years Ended November 30, 1997 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $7.27 $6.42 $5.69 $4.77 $3.79
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.64 1.75 1.86 2.09 2.15
Provision for possible loan losses (.11) (.11) (.24) (.11) --
Dividends to Class A Preferred
Certificateholders:
From net investment income -- -- (.43) (.26) (1.17)
As tax return of capital (.63) (.79) (.46) (.80) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $8.17 $7.27 $6.42 $5.69 $4.77
====================================================================================================================================
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 $5 422 117 $ 8 629 880 $10 534 185 $11 857 751 $13 941 968
Net assets applicable to Class
B Certificates, end of year $14 401 615 $12 816 146 $11 324 698 $10 039 426 $ 8 406 774
====================================================================================================================================
Ratios and Supplemental Data:
Ratio of expenses to average
net assets applicable to
Class B Certificates 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 21.29% 25.54% 30.76% 40.16% 50.29%
Number of Class B Certificates
outstanding, end of year 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 expenses to average net assets
applicable to Class B Certificates was 4.68%, 5.43%, 6.54%, 7.28% and
11.11% in 1997, 1996, 1995, 1994 and 1993, respectively.
The accompanying notes are an integral part of these financial statements.
7
</TABLE>
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
1. Organization College and University Facility Loan Trust
and Business 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.
8
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
1. Organization and All payments on the Loans and earnings under
Business the investment agreements and any required
(Continued) 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 (a) College and University Facility Loans
Significant
Accounting The Loans were purchased and recorded at a
Policies 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
November 30, 1997 was approximately
$80,132,000. As a result of prepayments of
Loans in the year ended November 30, 1997,
additional interest income of approximately
$348,000 was recognized.
9
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
2. Summary of (a) College and University Facility Loans
Significant (Continued)
Accounting
Policies The Trust's policy is to discontinue the
(Continued) accrual of interest on Loans for which
payment of principal or interest is 180 days
or more past due or for such other 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
November 30, 1997, 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
Policies amortized using the effective interest rate
(Continued) 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.
11
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
2. Summary of (e) Accounting for Impairment of a Loan and
Significant Allowance for Possible Loan Losses
Accounting (Continued)
Policies
(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.
12
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
2. Summary of (g) Use of Estimates
Significant
Accounting The preparation of financial statements in
Policies conformity with generally accepted
(Continued) 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, 1997
consist of the following:
<TABLE>
<CAPTION>
Outstanding Unamortized
Interest Principal Discount Carrying Value
Type Rate Stated Maturity (000s) (000s) (000s)
=======================================================================================================================
<S> <C> <C> <C> <C> <C>
Sequential 4.00% June 1, 2002 $ 70 482 $ 4 468 $ 66 014
Sequential 4.00% June 1, 2018 149 370 47 072 102 298
- ----------------------------------------------------------------------------------------------------------------------
$219 852 $51 540 $168 312
=======================================================================================================================
</TABLE>
Interest on the Bonds is payable
semiannually. On December 1, 1997 the Trust
made a principal payment of $13,807,259 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.
13
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
3. Bonds The estimated aggregate principal payments
(Continued) on the Bonds at November 30, 1997, 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 $ 23 218
1999 21 138
2000 19 922
2001 18 706
2002 18 731
Thereafter 118 137
--------------------------------------------
Total $219 852
============================================
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
Agreements (a) Servicer
On November 14, 1997 General Electric
Capital Corporation (GECC) transferred its
servicing responsibilities, as defined in
the Trust's Servicing Agreement dated April
1, 1988, to GMAC Commercial Mortgage
Corporation (GMAC).
As compensation for the services provided
under the servicing agreement, the Servicer
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.
The fees associated with services provided
during the year are as follows: for the
period December 1, 1996 through November 14,
1997, GECC's fees totaled $216,505 and for
the period from November 15, 1997 through
November 30, 1997, GMAC's fees totaled
$5,632. GECC was also reimbursed for related
expenses of $11,857.
(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, 1997. In addition,
the Owner Trustee, in its capacity as
manager, was reimbursed $1,664 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
year ended November 30, 1997, Bond
Trustee fees were $34,341. In addition,
the Bond Trustee was reimbursed $1,381
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 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.
Due to the shortfall in the revenue fund on
December 1, 1997, to distribute $466,197 to
the holders of Class A Preferred
certificates the Trust paid $444,588 and
issued additional Class A Preferred
certificates to pay the accrued dividends of
$21,609. In addition, as a result of certain
procedural difficulties associated with the
servicing of the Loans, there was an unusual
number of late payments as of November 1,
1997. In order to mitigate the impact
of the late payments on the December 1, 1997
distribution the Trustees elected to extend
the collection period from November 15, 1997
to December 5, 1997 (inclusive) and made a
second
16
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
5. Certificates distribution on December 23, 1997. On
(Continued) December 23, 1997, the Trust paid $1,487,384
to the holders of Class A Preferred
certificates, of which $57,160 was for
payment of dividends and $1,430,224 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 An analysis of the allowance for possible
Possible Loan loan losses for the year ended Losses
Losses November 30, 1997 is summarized as follows:
Balance, beginning of year $ 832 376
Provision 200 000
Charge-off --
--------------------------------------------
Balance, end of year $1 032 376
============================================
At November 30, 1997, the recorded
investment in loans that are considered to
be impaired under SFAS 114 was approximately
$2,000 with a related allowance for possible
loan losses of $500.
The average recorded investment in impaired
loans during the year ended November 30,
1997 was approximately $2,600. For the year
ended November 30, 1997, no interest income
was recognized on impaired loans.
The amortized cost of the Loan placed on
nonaccrual status is approximately $2,000 at
November 30, 1997. 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, 1997, excluding
payments for Loans in Default, as defined in
the Indenture, are as follows:
<TABLE>
<CAPTION>
Principal Interest
Payments Payments Total
Fiscal Year (000s) (000s) (000s)
==============================================================
<S> <C> <C> <C>
1998 $ 25 241 $ 7 915 $ 33 156
1999 23 403 6 942 30 345
2000 21 922 6 192 28 114
2001 20 502 5 484 25 986
2002 19 932 4 797 24 729
Thereafter 137 396 28 615 166 011
--------------------------------------------------------------
Total $248 396 $59 945 $308 341
==============================================================
</TABLE>
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, 1997:
<TABLE>
<CAPTION>
Amortized
Number Cost
Type of Collateral of Loans (000s) %
===========================================================================================
<S> <C> <C> <C>
Loans secured by a
first mortgage 302 $ 89 896 53.4%
Loans not secured by
a first mortgage 193 78 396 46.6
-------------------------------------------------------------------------------------------
Total Loans 495 $168 292 100.0%
===========================================================================================
</TABLE>
18
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
<TABLE>
<CAPTION>
7. Loans Amortized
(Continued) Number Cost
Type of Institution of Loans (000s) %
================================================================================================
<S> <C> <C> <C>
Private 310 88 916 52.8%
Public 185 79 376 47.2
------------------------------------------------------------------------------------------------
Total Loans 495 $168 292 100.0%
================================================================================================
</TABLE>
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
(Continued) experiencing 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 Financial of Financial Instruments," allows for the
Instruments 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.
20
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
========================================================================
8. Fair Value Current market prices are not available for
of Financial most of the Trust's financial instruments
Instruments since an active market generally does not
(Continued) 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.
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, 1997 is as follows:
<TABLE>
<CAPTION>
Book Value Fair Value
(000s) (000s)
================================================================================
<S> <C> <C>
Loans $ 167 260* $205 830
Investment Agreements:
Revenue Fund 19 566 18 424
Liquidity Fund 4 755 3 967
--------------------------------------------------------------------------------
$ 191 581 $228 221
================================================================================
Bonds $ 168 312 $195 435
================================================================================
</TABLE>
* Net of Allowance for Possible Loan
Losses of $1,032,376.
21
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
November 30, 1997
(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)
- ----------- ------------------------------------------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
COLLEGE AND UNIVERSITY LOANS (87.3%)
-------------- A --------------
$555 Alabama Agricultural and Mechanical University 3.000-3.750 07/01/2005 10.25 $415
2,025 Alabama Agricultural and Mechanical University 3.000 05/01/2018 10.27 1,140
160 Albion College 3.000 10/01/2009 10.56 105
573 Albright College 3.000 11/01/2015 10.23 337
30 Alcorn State University 2.875 11/01/1999 10.11 27
36 Alcorn State University 3.500 11/01/2002 10.15 31
50 Allegheny College 3.000 07/01/2015 10.38 20
10 Allentown College of St. Francis De Sales 3.000 11/01/1998 10.98 9
325 Alma College 3.750 04/01/2002 11.52 274
82 American International College 3.375 10/01/2002 10.84 68
134 Anderson University 3.500 03/01/2003 11.42 107
290 Anderson University 3.000 03/01/2006 11.19 209
67 Appalachian State University 3.500 07/01/2001 10.28 56
420 Arizona State University 3.125 09/01/2001 10.17 354
310 Arizona State University 3.375 10/01/2002 10.16 256
1,365 Arizona State University 3.000 04/01/2006 10.60 1,010
216 Arkansas State University 3.500 04/01/2001 10.97 190
148 Arkansas State University 3.375 10/01/2000 10.25 132
753 Arkansas State University 3.750 04/01/2005 10.75 586
26 Arkansas Technical University 2.875 10/01/1999 10.21 24
2,330 Auburn University 3.000 12/01/2018 9.16 1,367
229 Azusa Pacific University 3.750 04/01/2015 10.88 139
-------------- B --------------
225 Ball State University 3.000 07/01/1999 9.98 201
1,140 Baptist College at Charleston 3.000 03/01/2019 10.73 600
765 Baptist College at Charleston 3.000 03/01/2011 10.98 485
20 Bard College 2.750 10/01/1998 11.40 18
247 Becker Junior College 3.000 04/01/2005 11.21 185
132 Bellarmine College 3.625 05/01/2004 11.34 106
16 Belmont Abbey College 3.000 11/01/1998 10.96 15
19 Benedict College 2.875 02/01/1999 11.83 17
145 Benedict College 3.750 11/01/2004 10.75 113
995 Benedict College 3.000 11/01/2006 10.61 719
1,913 Benedict College 3.000 11/01/2020 10.36 996
1,905 Bentley College 3.000 11/01/2007 10.57 1,326
9 Bethany College 2.875 05/01/1998 11.89 9
331 Bethany College 3.375 11/01/2012 10.54 212
295 Bethany College 3.000 11/01/2017 10.40 161
580 Bethany College 3.000 11/01/2012 10.40 361
20 Bethune-Cookman College 3.000 11/01/2002 10.74 16
The accompanying notes are an integral part of these financial statements.
22
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
November 30, 1997
(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> <C>
$207 Boston Architectural Center 3.750 11/01/2004 10.77 $163
175 Bradford College 3.375 10/01/2001 10.85 146
320 Brandeis University 3.000 11/01/2011 10.64 202
155 Brevard College 3.000 11/01/2004 10.71 120
88 Brevard College 3.000 05/01/2006 11.12 64
150 Bryan College 3.500 04/01/2003 11.39 121
34 Buena Vista College 3.500 02/01/2000 11.85 31
136 Buena Vista College 3.000 02/01/2006 11.23 98
-------------- C --------------
1,130 California Polytechnic State University 3.000 11/01/2006 10.05 807
385 California State University 3.000 11/01/2006 8.75 298
1,335 California State University 3.000 11/01/2013 8.93 880
2,763 California State University 3.000 11/01/2019 8.99 1,624
146 Calvin College 3.000 11/01/2000 10.83 126
2,670 Cameron University 3.000 04/01/2007 10.16 1,943
275 Canisius College 3.375 05/01/2002 11.48 233
1,670 Canisius College 3.000 11/01/2017 10.40 917
116 Canisius College 3.000 11/01/1999 10.89 103
59 Carnegie-Mellon University 3.000 05/01/1999 11.37 54
250 Carnegie-Mellon University 3.500 11/01/2001 10.52 212
310 Carnegie-Mellon University 3.000 05/01/2009 10.73 208
1,080 Carnegie-Mellon University 3.000 11/01/2017 10.51 599
165 Carroll College 3.125 06/01/2000 10.75 141
376 Carroll College 3.750 06/01/2014 10.46 231
178 Carroll College 3.000 06/01/2018 10.15 98
470 Carroll College 3.750 03/01/2015 10.93 283
295 Case Western Reserve University 3.500 04/01/2003 11.39 237
289 Catawba College 3.000 12/01/2009 10.27 193
114 Central Missouri State University 3.125 07/01/2000 10.24 98
266 Central Missouri State University 3.375 07/01/2001 10.27 225
669 Central Missouri State University 3.625 07/01/2004 10.29 523
1,090 Central Missouri State University 3.000 07/01/2007 10.18 766
11 Central Texas College 3.000 11/01/1998 10.14 10
175 Champlain College 3.000 12/01/2013 10.19 106
615 Chapman College 3.000 10/01/2013 10.65 367
392 Chapman College 3.000 11/01/2005 10.63 289
257 Chapman College 3.000 11/01/2007 10.57 179
1,700 Chateau Community Housing Association 3.000 10/01/2012 10.51 1,038
80 Cisco Junior College 3.000 11/01/2005 10.04 61
110 Cisco Junior College 3.000 07/01/2005 10.15 76
38 Claflin College 3.125 04/01/2001 11.59 33
450 Clemson University 3.000 07/01/2005 9.51 346
The accompanying notes are an integral part of these financial statements.
23
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
November 30, 1997
(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> <C>
$168 Coker College 3.000 12/01/2009 10.04 $113
107 College of Notre Dame of Maryland 3.375 11/01/2002 10.48 88
256 College of Our Lady of the Elms 3.375 10/01/2001 10.86 215
19 College of Saint Rose 2.875 04/01/1998 11.95 18
964 College of Saint Rose 3.000 05/01/2022 10.43 490
596 College of Saint Thomas 3.000 11/01/2009 10.53 394
67 College of Santa Fe 3.500 10/01/2001 10.86 56
249 College of Santa Fe 3.000 10/01/2005 10.66 184
639 College of Santa Fe 3.000 10/01/2018 10.43 347
90 College of the Holy Cross 3.500 10/01/1999 11.03 83
1,115 College of the Holy Cross 3.625 10/01/2013 10.60 704
895 College of the Holy Cross 3.000 10/01/2006 10.63 639
44 College of the Virgin Islands 3.000 11/01/2002 10.15 36
102 College of the Virgin Islands 3.000 10/01/2003 10.16 81
281 Columbia College 3.625 07/01/2004 10.90 214
90 Columbia College 3.000 07/01/2006 10.80 64
163 Concordia College 3.000 04/01/2009 11.05 111
780 Concordia College 3.000 05/01/2019 10.65 414
107 Connecticut College 3.000 11/01/1999 10.89 95
72 Cornell College 3.000 10/01/2005 10.66 53
348 Cumberland University 3.000 08/01/2017 10.52 191
-------------- D --------------
118 Daemen College 3.125 04/01/2000 11.68 105
680 Daemen College 3.000 04/01/2016 10.77 383
201 Dakota Wesleyan University 3.000 10/01/2015 10.46 115
320 Dana College 3.000 04/01/2005 11.22 238
77 Dana College 3.500 04/01/2003 11.39 62
110 Dean Academy & Jr. College 3.500 10/01/1999 10.97 98
146 Dickinson College 3.000 05/01/2018 10.30 82
296 Dillard University 3.000 04/01/2008 11.09 207
111 Doane College 3.000 11/01/2000 10.83 96
575 Dormitory Authority State of NY (New York University) 3.000 07/01/2000 8.95 508
689 Dowling College 3.000 10/01/2010 10.75 444
142 Drexel University 2.875 05/01/2001 11.57 125
1,220 Drexel University 3.500 05/01/2014 10.53 723
20 Drury College 3.125 10/01/1999 11.32 18
307 Drury College 3.000 04/01/2015 10.63 179
556 Drury College 3.000 10/01/2010 10.75 359
1,168 D'Youville College 3.000 04/01/2018 10.90 625
-------------- E --------------
126 East Texas State University 2.875 09/01/1999 8.94 115
1,376 East Texas State University 3.500 03/01/2002 9.48 1,100
The accompanying notes are an integral part of these financial statements.
24
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
November 30, 1997
(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> <C>
$1,679 East Texas State University 3.000 03/01/2002 9.60 $1,301
162 East Texas State University 3.000 11/01/2000 9.26 148
97 Eastern Oklahoma State College 3.125 05/15/1999 9.96 91
430 Elizabeth City State University 3.000 10/01/2017 10.02 249
545 Embry-Riddle Aeronautical University 3.000 09/01/2007 10.64 376
175 Emmanuel College 3.000 11/01/2013 10.45 104
169 Emory University 2.875 09/01/1998 11.00 155
-------------- F --------------
56 Fairleigh Dickinson University 3.125 11/01/1999 10.93 50
1,780 Fairleigh Dickinson University 3.000 11/01/2017 10.39 982
7 Findlay College 2.750 07/01/1998 11.04 6
245 Florida Agricultural and Mechanical University 3.625 07/01/2004 10.29 191
258 Florida Atlantic University 3.500 07/01/2004 10.27 214
395 Florida Atlantic University 3.000 07/01/2006 10.18 274
226 Florida Institute of Technology 3.000 11/01/2009 10.53 154
63 Florida Southern College 3.000 11/01/1999 10.89 56
136 Florida State University 3.000 01/01/1999 9.20 127
246 Florida State University 3.500 06/01/2001 8.44 216
835 Florida State University 3.000 01/01/2009 9.40 602
58 Fort Hays State University 3.500 10/01/2001 10.19 50
133 Fort Hays State University 3.625 10/01/2002 10.18 110
185 Fort Hays State University 3.000 10/01/2007 10.08 131
640 Fort Lewis College 3.000 10/01/2006 10.09 467
-------------- G --------------
790 Gannon University 3.000 11/01/2011 10.49 497
216 Gannon University 3.000 12/01/2022 10.13 110
96 Gavilan College 3.000 04/01/2006 10.59 71
100 George Fox College 3.500 04/01/2001 11.25 87
839 George Fox College 3.000 07/01/2018 10.64 451
191 George Washington University 3.500 05/01/2000 11.30 171
928 George Washington University 3.500 11/01/2002 10.50 776
38 George Washington University 3.000 11/01/1998 10.58 35
81 Georgetown College 3.000 12/01/1999 10.02 72
587 Georgetown College 3.000 12/01/2008 10.04 404
1,020 Georgetown College 3.000 12/01/2009 10.05 684
2,996 Georgetown University 3.000 11/01/2020 10.36 1,560
7,595 Georgetown University 4.000 11/01/2020 10.52 4,340
1,427 Georgetown University 3.000 05/01/2005 10.86 1,076
833 Georgia Education Authority Board of Regents
of the University System of Georgia 3.375 01/01/2003 10.60 682
13 Grambling State University 3.000 11/01/1999 10.12 12
126 Grambling State University 3.000 11/01/2000 10.11 110
The accompanying notes are an integral part of these financial statements.
25
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
November 30, 1997
(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> <C>
-------------- H --------------
$427 Hampshire College 3.000 07/01/2013 10.75 $253
1,529 Hampshire College 3.000 02/01/2014 10.70 900
240 Harcum Junior College 3.375 11/01/2002 10.77 196
850 Harper Grace Hospital 3.625 04/01/2005 11.26 646
98 Henderson State University 3.125 04/01/1999 11.06 90
183 Hesston College 3.000 04/01/2006 11.14 132
366 High Point College 3.000 12/01/2010 10.26 234
2,199 Hinds Junior College 3.000 04/01/2013 10.42 1,382
131 Hiwassee College 3.375 01/01/2003 11.58 107
214 Hiwassee College 3.000 09/15/2018 10.58 115
2,229 Hofstra University 3.000 11/01/2012 10.61 1,377
23 Holy Family College 3.000 12/01/1997 10.00 22
314 Hood College 3.625 11/01/2014 10.54 194
445 Houston Tillotson College 3.500 04/01/2014 10.90 274
75 Huntingdon College 3.500 03/01/2002 11.54 62
295 Huntingdon College 3.000 10/01/2008 10.60 200
-------------- I --------------
34 Illinois Benedictine College 3.000 10/01/1998 10.98 31
238 Illinois Institute of Technology 3.000 03/01/2003 11.10 190
201 Indiana University 2.875 04/01/1998 10.10 193
112 Indiana University 2.875 04/01/1999 10.08 105
542 Indiana University 3.375 04/01/2001 10.06 478
1,160 Indiana University 3.500 04/01/2001 10.06 1,021
1,708 Indiana University 3.750 12/01/2003 8.84 1,448
380 Indiana University 3.000 07/01/1999 9.31 343
139 Inter American University of Puerto Rico 3.000 09/01/2007 10.66 97
2,674 Inter American University of Puerto Rico 3.000 01/01/2017 10.94 1,460
-------------- J --------------
1,915 James Madison University 3.000 06/01/2009 10.49 1,255
44 John Brown University 2.875 04/01/2000 11.64 39
432 Johnson & Wales College 3.000 11/01/2013 10.59 261
265 Johnson C. Smith University 3.000 05/01/2005 11.18 198
35 Judson College 3.750 07/01/2004 10.92 27
-------------- K --------------
241 Kansas State University 3.375 10/01/2002 9.12 206
775 Kansas State University 3.625 04/01/2004 9.77 602
114 Kendall College 3.375 10/01/2002 10.82 93
266 Kendall College 3.000 10/01/2008 10.59 179
576 Kent State University 3.500 12/01/2000 8.90 515
410 Knox College 3.000 04/01/2006 11.15 296
The accompanying notes are an integral part of these financial statements.
26
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
November 30, 1997
(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> <C>
-------------- L --------------
$360 LaGrange College 3.000 03/01/2009 11.06 $238
279 Lamar University 3.500 04/01/2003 10.76 228
379 Langston University 3.375 10/01/2003 10.15 305
1,215 Langston University 3.000 04/01/2007 10.56 872
499 Lassen Junior College District 3.000 04/01/2020 10.27 268
1,670 Leland Stanford Junior College 3.375 05/01/2003 11.33 1,342
224 Lenoir Rhyne College 3.000 12/01/2006 10.04 163
88 Linfield College 3.000 10/01/2017 10.44 48
86 Long Island University 3.000 10/01/1998 11.00 79
901 Long Island University 3.750 05/01/2005 11.22 691
244 Long Island University 3.000 11/01/2009 10.69 162
853 Long Island University 3.000 11/01/2009 10.69 567
495 Long Island University 3.750 04/01/2003 11.41 401
595 Long Island University 3.625 06/01/2014 10.49 362
21 Long Island University 3.750 05/01/1998 11.90 20
130 Long Island University 3.750 10/01/2004 10.79 101
423 Louisiana State University 3.500 07/01/2001 8.65 373
1,116 Louisiana State University 3.625 07/01/2004 9.04 907
448 Louisiana State University 3.000 07/01/2005 8.84 354
395 Louisiana State University 3.000 07/01/2006 8.87 307
144 Louisiana State University 3.000 05/01/1999 9.17 136
336 Louisiana State University 3.000 07/01/2001 8.62 291
43 Loyola University 3.000 11/01/1998 10.96 40
232 Lycoming College 3.500 05/01/2001 11.22 202
266 Lycoming College 3.625 05/01/2014 10.64 166
355 Lycoming College 3.750 05/01/2015 10.62 219
553 Lynchburg College 3.750 05/01/2015 10.64 346
700 Lynchburg College 3.000 05/01/2018 10.68 382
-------------- M --------------
610 MacAlester College 3.375 05/01/2002 11.41 506
476 MacAlester College 3.000 05/01/2020 10.46 252
30 Madison General Hospital 3.000 12/01/1999 9.67 27
585 Marian College 3.000 10/01/2016 10.45 328
38 Marian College 3.000 11/01/1999 10.89 34
57 Marist College 3.500 04/01/2000 11.73 52
98 Marquette University 3.000 07/31/2024 10.59 47
23 Mary Baldwin College 2.875 11/01/1999 10.94 21
468 Mary Baldwin College 3.375 05/01/2012 10.68 302
685 Marymount University 3.000 05/01/2016 10.52 392
10 McCook Community College 3.000 01/01/1998 11.16 9
970 McLennan Community College 3.000 04/01/2006 10.49 722
The accompanying notes are an integral part of these financial statements.
27
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
November 30, 1997
(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> <C>
$88 McNeese State University 3.500 10/01/2001 10.18 $75
1,134 Memorial Hospital for Cancer and Allied Diseases 3.375 04/01/2012 10.68 730
113 Menlo College 3.125 04/01/2001 11.53 96
525 Mercer University 3.000 05/01/2014 10.58 313
1,590 Mercy College of Detroit 3.625 10/01/2013 10.59 989
28 Mercy Hospital (A) 3.000 10/01/1998 10.98 2
45 Merrimack College 3.000 04/15/2019 10.53 31
129 Merrimack College 3.000 04/15/2008 10.79 69
95 Middlebury College 3.375 10/01/2002 11.12 78
118 Midland Lutheran College 3.000 04/01/2005 11.20 88
20 Midland Lutheran College 3.000 10/01/1998 10.98 18
612 Millsaps College 3.000 11/01/2021 10.34 313
86 Mississippi State University 2.875 01/01/2000 10.99 76
1,685 Mississippi State University 3.000 12/01/2020 9.64 929
105 Mississippi Valley State University 3.500 07/01/2001 10.28 89
117 Molloy College 3.375 10/01/2002 10.81 95
8 Montreat-Anderson College 3.000 11/01/1998 10.96 7
246 Moravian College 3.375 11/01/2012 10.52 155
775 Morehouse College 3.000 07/01/2010 10.50 454
2,511 Morgan State University 3.000 11/01/2014 10.56 1,503
235 Morris Brown College 3.750 05/01/2007 11.12 170
2,123 Morris Brown College 2.750-3.750 05/01/2018 10.89 1,283
677 Morris College 3.000 11/01/2009 10.53 447
99 Muhlenberg College 3.000 11/01/2000 10.50 86
-------------- N --------------
171 New England College 3.000 04/01/2016 10.77 96
725 Newark Beth Israel Hospital 3.625 01/01/2014 11.06 438
76 NIACC Dormitories, Inc. 3.000 10/01/2012 10.27 48
72 Nicholls State University 3.000 09/01/1999 8.88 66
3,010 Norfolk State University 3.000 12/01/2021 9.77 1,599
697 North Carolina Agricultural and
Technical State University 3.000 05/01/2014 10.34 422
660 North Carolina State University 3.625 09/01/2004 7.97 560
295 North Carolina State University 3.125 09/01/2001 7.58 264
350 North Carolina State University 3.500 09/01/2001 7.63 315
171 North Greenville College 3.000 11/01/2003 10.72 136
266 Northeast Louisiana University 3.500 04/01/2001 10.28 235
478 Northeast Missouri State University 3.375-3.500 05/01/2002 10.75 404
73 Northeastern Oklahoma State University 3.000 06/01/1998 9.73 67
3,265 Northeastern University 3.000 05/01/2018 10.53 1,785
156 Northeastern University 3.000 05/01/2004 10.97 121
75 Northwestern State University 3.125 10/01/2000 10.15 65
The accompanying notes are an integral part of these financial statements.
28
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
November 30, 1997
(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> <C>
$460 Nova University 3.000 12/01/2007 10.04 $326
-------------- O -------------
294 Occidental College 3.000 10/01/2019 10.41 155
245 Olympic Community College 3.000 10/01/2008 10.07 169
82 Ouachita Baptist University 3.125 12/01/1999 10.03 73
37 Ouachita Baptist University 3.000 12/01/2006 10.04 27
-------------- P -------------
14 Pacific University 3.000 11/01/1999 10.89 12
1,001 Paine College 3.000 10/01/2016 10.45 560
16 Pan American University 3.000 10/01/1999 9.23 15
2,552 Philadelphia College of Art 3.000 01/01/2022 10.62 1,272
705 Pine Manor College 3.625 10/01/2003 10.80 559
32 Point Loma Nazarene College 2.875 04/01/1999 11.85 30
10 Point Loma Nazarene College 2.875 04/01/1998 11.89 10
185 Polytechnic University 3.375 10/01/2011 10.59 119
1,560 Portland Student Services Inc. 3.000 01/01/2011 10.36 1,006
223 Post College 3.000 04/01/2010 10.76 145
1,295 Purdue University 3.625 07/01/2004 9.33 1,040
373 Purdue University 3.000 07/01/2005 9.26 291
-------------- Q -------------
25 Queens College 3.000 07/01/1998 11.07 23
53 Queens College 3.500 11/01/2001 10.88 46
177 Queens College 3.625 07/01/2004 10.90 135
-------------- R -------------
342 Randolph-Macon College 3.000 05/01/2010 10.72 225
285 Randolph-Macon College 3.000 11/01/2000 10.50 247
570 Regis College (Denver) 3.000 11/01/2012 10.47 348
154 Regis College (Weston) 3.375 10/01/2002 10.85 129
260 Rhode Island College 3.000 10/01/2005 10.09 195
145 Rider College 3.500 05/01/2001 11.57 127
308 Rider College 3.375 05/01/2002 11.44 257
137 Rider College 3.125 11/01/2000 10.86 124
1,945 Rider College 3.625 11/01/2013 10.42 1,220
482 Rider College 3.000 05/01/2017 10.70 269
117 Rio Grande College 3.000 03/30/2009 10.93 79
70 Roberts Wesleyan College 3.000 11/01/2000 10.83 63
171 Roger Williams College 3.000 11/01/1999 10.89 152
41 Russell Sage College 3.000 10/01/1998 10.98 38
200 Rutgers, The State University 2.750 05/01/1999 8.84 188
730 Rutgers, The State University 3.750 05/01/2016 9.19 484
40 Rutgers, The State University 2.875 05/01/1999 8.80 38
745 Rutgers, The State University 3.125 05/01/2001 8.89 686
The accompanying notes are an integral part of these financial statements.
29
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
November 30, 1997
(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> <C>
-------------- S -------------
$146 Saint Ambrose University 3.000 11/01/2001 10.78 $122
145 Saint Anselm College 3.375 10/01/2001 10.88 123
41 Saint Edward's University 3.125 04/01/2000 11.69 37
117 Saint John's University 3.000 10/01/2002 10.76 94
175 Saint Joseph Hospital 3.500 10/01/2001 10.87 151
202 Saint Louis College of Pharmacy 3.375 10/01/2004 10.74 155
86 Saint Louis University 3.125 10/01/2000 10.90 75
489 Saint Louis University 3.500 11/01/2002 10.80 401
128 Saint Mary's College 3.000 03/01/2005 11.25 95
452 Saint Mary's College 3.000 06/01/2020 10.14 241
23 Saint Mary's University of San Antonio 3.000 10/01/1998 10.98 21
2,140 Saint Michael's College 3.000 05/01/2013 10.60 1,306
331 Saint Norbert College 3.375 04/01/2002 11.52 280
262 Saint Norbert College 3.625 04/01/2004 11.33 205
448 Saint Norbert College 3.000 04/01/2007 11.10 316
537 Saint Paul's College 3.000 11/01/2014 10.56 316
115 Saint Peter's College 3.000 05/01/1999 11.70 105
705 Saint Vincent College 3.500 05/01/2013 10.86 440
350 Sam Houston State University 3.500 10/01/2001 9.10 306
1,015 San Diego State University 3.000 11/01/2007 10.04 743
1,320 Sangamon State University 3.000 11/01/2018 10.12 751
405 Seattle University 3.500 11/01/2001 10.84 344
570 Seattle University 3.000 11/01/2008 10.55 386
420 Seton Hall University 3.000 11/01/2000 10.83 375
360 Seton Hill College 3.625 11/01/2014 10.53 221
31 Sierra College 3.375 04/01/2002 10.87 27
342 Simpson College 3.000 07/01/2016 10.58 189
426 South Dakota School of Mines and Technology 3.000 04/01/2018 10.30 236
362 South Dakota School of Mines and Technology 3.625 04/01/2002 10.85 309
38 South Plains College 3.500 10/01/2002 10.18 31
96 South Plains College 3.625 10/01/2004 10.17 75
67 South Plains College 3.000 10/01/2005 10.10 51
530 Southeast Missouri State University 3.500 04/01/2002 10.82 445
1,366 Southeast Missouri State University 3.000 04/01/2007 10.58 993
855 Southeastern Oklahoma State University 3.000 04/01/2009 10.51 584
172 Southern Arkansas University 3.500 10/01/2002 10.23 142
614 Southern Methodist University 3.000 10/01/2007 10.61 426
288 Southern Nazarene University 3.750 04/01/2005 11.27 220
25 Southern University and
Agricultural and Mechanical College 2.875 04/01/1998 11.13 24
795 Southwest Missouri State College 3.375 10/01/2002 10.17 666
The accompanying notes are an integral part of these financial statements.
30
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
November 30, 1997
(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> <C>
$2,520 Southwest Texas State University 3.000 10/01/2015 9.51 $1,532
20 Southwestern Christian College 3.000 11/01/2000 10.83 17
46 Spalding University 3.125 09/01/2000 10.95 41
411 Spalding University 3.000 09/01/2007 10.66 290
36 Springfield College 3.500 11/01/1999 10.60 33
50 Springfield College 3.125 05/01/2000 11.29 45
528 Springfield College 3.500 05/01/2013 10.67 339
99 Springfield College 3.000 05/15/2005 10.11 69
215 State Center Community College 3.000 10/01/2004 10.10 166
52 Stephen F. Austin State University 2.875 10/01/1999 9.23 47
2,127 Stephen F. Austin State University 3.375-3.500 10/01/2012 9.57 1,418
223 Stetson University 3.000 01/01/2006 11.25 159
175 Stillman College 3.750 02/01/2004 11.42 136
393 Stonehill College 3.000 10/01/2006 10.64 281
28 Stonehill College 3.000 11/01/1998 10.96 26
175 SUNY, Mohawk Valley Community College 3.000 04/01/2005 10.26 113
102 Susquehanna University 3.125 05/01/2000 11.27 91
778 Syracuse University 3.000 05/01/2008 10.74 538
-------------- T -------------
76 Talladega College 3.375 12/01/2001 10.08 65
457 Talladega College 3.000 12/01/2012 10.24 282
299 Taylor University 3.000 10/01/2012 10.50 182
906 Taylor University 3.000 10/01/2013 10.49 543
126 Temple University 3.125 03/01/1999 10.70 118
260 Tennessee State University 3.375 01/01/1999 11.10 238
756 Texas A & I University 3.000 07/01/2009 9.57 520
40 Texas A & I University 3.000 06/01/1998 9.10 37
189 Texas Southern University 3.500 04/01/2001 10.89 165
550 Texas Southern University 3.500 04/01/2013 10.45 349
515 Transylvania University 3.000 11/01/2010 10.51 332
930 Trinity University 3.625 09/01/2004 10.82 714
402 Tufts University 3.375 10/01/2001 10.87 339
2,444 Tufts University 3.000 10/01/2021 10.39 1,243
95 Tulane University of Louisiana 3.000 10/01/1998 8.74 89
750 Tulane University of Louisiana 3.500 10/01/2001 9.06 653
-------------- U -------------
54 Union College 3.000 11/01/2002 10.74 44
2,105 University of Alabama in Birmingham 3.000 11/01/2008 7.97 1,616
127 University of Alabama in Huntsville 3.000 05/01/1999 10.05 118
124 University of Alaska 3.500 04/01/2000 10.94 111
223 University of Alaska 3.375 04/01/2002 10.82 188
536 University of Alaska 3.500 04/01/2003 10.80 450
The accompanying notes are an integral part of these financial statements.
31
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
November 30, 1997
(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> <C>
$195 University of Alaska 3.000 10/01/1999 10.22 $175
313 University of Arizona 3.500 04/01/2003 10.82 263
166 University of Arkansas at Little Rock 3.500 04/01/2001 10.04 146
215 University of Arkansas at Little Rock 3.000 11/01/2009 9.42 157
573 University of Central Arkansas 3.000 04/01/2005 10.69 434
585 University of Central Florida 3.000 10/01/2007 10.08 415
355 University of Chicago 3.500 12/01/2001 10.10 300
113 University of Chicago 3.375 12/01/2001 10.08 95
42 University of Chicago 3.500 12/01/2002 10.11 34
150 University of Delaware 3.125 11/01/2000 8.84 134
223 University of Delaware 3.375 11/01/2000 8.81 204
1,380 University of Delaware 3.000 11/01/2006 9.08 1,052
729 University of Delaware 3.000 12/01/2018 8.81 439
2,455 University of Florida 3.000 07/01/2014 10.15 1,458
172 University of Hartford 3.000 11/01/2001 10.78 143
54 University of Hawaii at Manoa 2.875 10/01/1999 10.13 48
78 University of Hawaii at Manoa 3.500 10/01/2001 10.18 67
71 University of Lowell 3.000 11/01/2000 7.62 66
2,700 University of Michigan 3.750 10/01/2005 9.51 2,137
185 University of Michigan 3.000 04/01/1999 10.08 172
70 University of Missouri 3.000 05/01/1998 10.07 67
1,078 University of Missouri 3.375 05/01/2002 10.03 948
115 University of Missouri 2.875 11/01/2000 9.25 102
112 University of Missouri 3.000 05/01/1998 10.07 108
18 University of Missouri 3.000 05/01/1998 10.08 17
105 University of Montevallo 3.125 11/01/2000 9.27 93
261 University of Nevada at Reno 3.000 11/01/1999 10.12 244
882 University of North Carolina 3.000 11/01/2005 8.81 702
690 University of North Carolina 3.000 01/01/2008 9.50 500
61 University of North Carolina 3.000 01/01/2007 9.50 46
1,082 University of Notre Dame 3.000 02/15/2019 10.62 577
33 University of Portland 2.875 04/01/1998 11.96 31
885 University of Portland 3.375 04/01/2013 10.88 554
38 University of Portland 3.000 11/01/1998 10.98 35
37 University of Puerto Rico, Rio Piedras Campus 3.125 06/01/2000 9.17 33
1,939 University of Puerto Rico, Rio Piedras Campus 3.000 06/01/2011 9.39 1,283
54 University of Rhode Island 3.000 10/01/2001 9.68 47
13 University of Rochester 2.875 10/01/1998 11.04 12
693 University of Saint Thomas 3.000 10/01/2019 10.41 366
515 University of Santa Clara 3.125 04/01/2002 11.44 423
235 University of Santa Clara 3.375 04/01/2002 11.45 194
1,155 University of Santa Clara 3.625 04/01/2004 11.33 905
The accompanying notes are an integral part of these financial statements.
32
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
November 30, 1997
(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> <C>
$49 University of Scranton 3.125 11/01/2000 10.84 $42
207 University of South Dakota 3.500 10/01/2001 9.59 179
1,015 University of South Florida 3.750 07/01/2005 10.30 773
381 University of Steubenville 3.125 04/01/2010 10.98 248
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 60
1,371 University of Vermont 3.000 07/01/2016 8.95 849
230 University of Vermont 3.375 07/01/2001 8.33 204
1,260 University of Vermont 3.000 07/01/2019 9.06 733
175 University of Washington 3.000 08/01/1999 8.82 159
380 University of Washington 3.500 08/01/2002 9.07 331
368 University of Washington 3.000 08/01/2003 9.06 300
1,680 University Student Co-Operative Association 3.000 04/01/2019 10.70 890
142 Ursinus College 3.000 10/01/2000 10.86 122
568 Utica College 3.000 11/01/2009 10.53 375
-------------- V -------------
530 Vermont State College 3.000 06/01/2008 9.02 383
279 Vermont State College 3.000 07/01/2014 9.30 175
1,255 Villanova University 3.000 04/01/2019 10.70 666
3,980 Vincennes University 3.000 06/01/2023 9.02 2,171
2,842 Virginia Commonwealth University 3.000 06/01/2011 10.01 1,815
1,205 Virginia Commonwealth University 3.000 06/01/2004 10.08 922
378 Virginia Wesleyan College 3.000 11/01/2009 10.54 253
218 Virginia Wesleyan College 3.000 11/01/2010 10.51 140
-------------- W -------------
30 Waldorf College 3.125 07/01/2000 10.97 26
271 Waldorf College 3.000 07/01/2005 10.77 197
56 Wartburg College 3.500 10/01/2001 10.87 47
177 Wartburg College 3.750 04/01/2011 11.00 117
875 Washington State University 3.625 04/01/2004 10.02 711
570 Washington State University 3.750 04/01/2004 10.03 467
985 Washington State University 3.375 04/01/2003 10.02 817
50 Washington State University 3.000 04/01/1999 10.08 47
24 Washington University 3.000 10/01/1998 11.05 22
387 Washington University 3.500 10/01/2001 10.91 333
62 Wayne State University 3.000 04/01/2000 11.69 58
251 Wesley College 3.375 05/01/2013 10.88 158
82 West Kern Junior College District 3.625 04/01/2004 10.73 65
550 West Valley College 3.000 04/01/2009 10.50 375
200 West Virginia State College 3.000 05/01/1998 11.05 192
168 West Virginia Wesleyan College 2.875 05/01/2000 11.56 151
497 West Virginia Wesleyan College 3.000 05/01/2015 10.75 287
The accompanying notes are an integral part of these financial statements.
33
</TABLE>
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
November 30, 1997
(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> <C>
$504 Western Carolina University 3.625 05/01/2003 10.75 $419
50 Western Washington University 3.125 10/01/1998 10.18 46
265 Western Washington University 3.500 10/01/2001 10.18 226
705 Western Washington University 3.625 10/01/2004 10.18 555
500 Western Washington University 3.750 10/01/2005 10.19 385
275 Westminster College of Salt Lake 3.000 11/01/2017 10.39 152
53 Westmoreland Hospital Association 3.500 07/01/2001 10.98 44
24 Wheaton College 2.875 04/01/1999 11.50 23
920 Wheaton College 3.500 04/01/2013 10.70 578
260 Wheeling College 3.500 05/01/2001 11.23 218
94 Wheeling College 3.000 11/01/2007 10.59 66
30 Wheelock College 3.000 05/01/2011 10.23 19
49 Wichita State University 3.000 10/01/2000 9.29 43
845 Wittenberg University 3.000 05/01/2015 10.76 487
263 Wittenberg University 3.000 11/01/2017 10.39 149
56 Wooster Business College 3.000 03/30/2009 10.88 38
169 Worcester Polytechnic Institute 3.375 04/01/2001 11.57 146
754 Wright State University 3.000 05/01/2009 9.89 537
-------------- Y -------------
386 York Hospital 3.000 05/01/2020 10.64 203
--------
---------
$248,424 Total College and University Loans $168,292
---------
Allowance for Possible Loan Losses 1,032
--------
Net College and University Loans $167,260
--------
INVESTMENT AGREEMENTS (12.7%)
-----------------------------
Morgan Guaranty Trust Company -
$4,755 Liquidity Fund 7.750 06/01/2018 7.750 $4,755
--------- Morgan Guaranty Trust Company -
19,566 Revenue Fund 7.050 06/01/2018 7.050 19,566
--------- --------
$24,321 Total Investment Agreements $24,321
- ---------- --------
$272,745 Total Investments (100.0%) $191,581
========== ========
(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.
The accompanying notes are an integral part of these financial statements.
34
</TABLE>
<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, 1997, 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, 1997 by correspondence with GMAC Commercial
Mortgage 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,
1997, 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
January 13, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the College
and University Facility Loan Trust Two November 30, 1997 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-30-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 191581
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 1969
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1235
<TOTAL-ASSETS> 194785
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 168312
<OTHER-ITEMS-LIABILITIES> 6650
<TOTAL-LIABILITIES> 174962
<SENIOR-EQUITY> 5422
<PAID-IN-CAPITAL-COMMON> 15079
<SHARES-COMMON-STOCK> 1763800
<SHARES-COMMON-PRIOR> 1763800
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2441
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 19824
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19724
<OTHER-INCOME> 0
<EXPENSES-NET> 16826
<NET-INVESTMENT-INCOME> 2898
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2698
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1112
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1622)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 1505
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 16334
<GROSS-EXPENSE> 16826
<AVERAGE-NET-ASSETS> 20553
<PER-SHARE-NAV-BEGIN> 7.27
<PER-SHARE-NII> 1.64
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.11)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (.63)
<PER-SHARE-NAV-END> 8.17
<EXPENSE-RATIO> .82
<AVG-DEBT-OUTSTANDING> 176144
<AVG-DEBT-PER-SHARE> 99.87
</TABLE>
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