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SIGNATURE WILLIAM G. SWAN
TITLE VICE PRESIDENT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To State Street Bank and Trust Company, Owner Trustee of
College and University Facility Loan Trust Two:
In planning and performing our audit of the financial statements of College and
University Facility Loan Trust Two (a Massachusetts business trust) for the year
ended November 30, 1998, we considered its internal control structure, including
procedures for safeguarding securities, in order to determine our auditing
procedures for the purpose of expressing our opinion on the financial statements
and to comply with the requirements of Form N-SAR and not to provide assurance
on the internal control structure.
Our audit of the financial statements was also not designed to detect whether
the Trust's systems are year 2000 compliant. Accordingly, we do not provide any
assurance with regard to the Trust's efforts to make its systems, or any other
systems (such as those of Trust's borrowers, service providers or any other
third parties), year 2000 compliant or provide assurance on whether the Trust
has addressed or will be able to address all of the affected systems on a timely
basis. For information on the impact of the year 2000 on the Trust, see the Year
2000 discussion included in the Trust's annual report for the year ended
November 30, 1998 filed with the Securities and Exchange Commission on Form
N-30D.
The management of College and University Facility Loan Trust Two is responsible
for establishing and maintaining an internal control structure. In fulfilling
this responsibility, estimates and judgments by management are required to
assess the expected benefits and related costs of internal control structure
policies and procedures. The objectives of an internal control structure are to
provide management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition and that
transactions are executed in accordance with management's authorization and
recorded properly to permit preparation of financial statements in conformity
with generally accepted accounting principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and not be detected. Also, projection of any evaluation
of the structure to future periods is subject to the risk that it may become
inadequate because of changes in conditions or that the effectiveness of the
design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of the specific internal control structure elements does not reduce to
a relatively low level the risk that errors or irregularities in amounts that
would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving the internal control structure, including procedures for safeguarding
securities, that we consider to be material weaknesses as defined above as of
November 30, 1998.
This report is intended solely for the information and use of the Owner Trustee
and the Securities and Exchange Commission.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 29, 1999
