<PAGE>
College and University
Facility Loan Trust Two
--------------------------------------------------------------------------------
Compiled Financial Statements
Six Months Ended May 31, 2000
<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, 2000, 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,
1999, 1998, 1997, 1996 and 1995, presented herein for comparative purposes, was
audited by other auditors whose report thereon dated January 5, 2000 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 18, 2000
<PAGE>
COLLEGE AND UNIVERSITY
FACILITY LOAN TRUST TWO
BALANCE SHEET
<TABLE>
<CAPTION>
MAY 31, 2000
----------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
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) $ 145,637,685
CASH 169,493
PREPAID AND OTHER EXPENSES 39,750
INTEREST RECEIVABLE 1,346,862
DEFERRED BOND ISSUANCE COSTS (Note 2) 553,915
----------------------------------------------------------------------------------------------------------------------
Total assets 147,747,705
----------------------------------------------------------------------------------------------------------------------
LIABILITIES
BONDS PAYABLE, net of unamortized discount (Notes 1, 3 and 8) 125,429,383
INTEREST PAYABLE (Note 3) 3,230,754
ACCRUED EXPENSES AND OTHER LIABILITIES 197,664
DISTRIBUTIONS PAYABLE TO CLASS B CERTIFICATEHOLDERS (Note 5) 1,557,058
----------------------------------------------------------------------------------------------------------------------
Total liabilities 130,414,859
----------------------------------------------------------------------------------------------------------------------
NET ASSETS
CLASS B CERTIFICATES, par value $1 - authorized, issued and
outstanding - 1,763,800 certificates (Note 5) 1,763,800
ACCUMULATED DEFICIT (Notes 2 and 5) (5,288,627)
PAID-IN CAPITAL (Note 2) 20,857,673
----------------------------------------------------------------------------------------------------------------------
Total net assets $ 17,332,846
----------------------------------------------------------------------------------------------------------------------
Net asset value per Class B certificate
(based on 1,763,800 certificates outstanding) $ 9.83
----------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING ACCOUNTANTS' COMPILATION REPORT AND NOTES TO FINANCIAL STATEMENTS.
</TABLE>
3
<PAGE>
COLLEGE AND UNIVERSITY
FACILITY LOAN TRUST TWO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED MAY 31, 2000
----------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest income (Note 2) $ 7,417,124
----------------------------------------------------------------------------------------------------------------------
EXPENSES:
Interest expense (Notes 2 and 3) 6,037,691
Servicer fees (Note 4) 76,620
Trustee fees (Note 4) 28,398
Other trust and bond administration expenses 109,312
----------------------------------------------------------------------------------------------------------------------
Total expenses 6,252,021
----------------------------------------------------------------------------------------------------------------------
Net investment income 1,165,103
----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,165,103
----------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING ACCOUNTANTS' COMPILATION REPORT AND NOTES TO FINANCIAL STATEMENTS.
</TABLE>
4
<PAGE>
COLLEGE AND UNIVERSITY
FACILITY LOAN TRUST TWO
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED MAY 31, 2000
----------------------------------------------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 3,482,782
Interest paid (3,460,761)
Operating expenses paid (237,992)
----------------------------------------------------------------------------------------------------------------------
Net cash used for operating activities (215,971)
----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in funds held under investment agreements 3,492,572
Principal payments on Loans 9,941,360
----------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 13,433,932
----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments on Bonds (11,500,367)
Dividends on Class A Preferred certificates (26,845)
Redemptions of Class A Preferred certificates (393,335)
----------------------------------------------------------------------------------------------------------------------
Distribution to Class B certificateholders (1,175,908)
----------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (13,096,455)
----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH 121,506
CASH, beginning of period 47,987
----------------------------------------------------------------------------------------------------------------------
CASH, end of period $ 169,493
----------------------------------------------------------------------------------------------------------------------
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 $ 1,165,103
Decrease in interest receivable 113,814
Increase in prepaid and other expenses (39,750)
Increase in accrued expenses and other liabilities 16,087
Decrease in Bond interest payable (230,007)
Amortization of original issue discount on Bonds 2,760,453
Amortization of purchase discount on Loans (4,048,155)
Amortization of deferred Bond issuance costs 46,484
----------------------------------------------------------------------------------------------------------------------
Net cash used for operating activities $ (215,971)
----------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING ACCOUNTANTS' COMPILATION REPORT AND NOTES TO FINANCIAL STATEMENTS.
</TABLE>
5
<PAGE>
COLLEGE AND UNIVERSITY
FACILITY LOAN TRUST TWO
STATEMENT OF CHANGES IN NET ASSETS
(NOTE 2 (F))
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED Year Ended
MAY 31, November 30,
2000 1999
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 1,165,103 $ 2,430,438
DIVIDENDS TO CERTIFICATEHOLDERS (Notes 2 and 5):
Class A Preferred certificateholders ($.1365 per certificate annually):
As tax return of capital - (203,329)
----------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Class B
certificateholders resulting from operations 1,165,103 2,227,109
----------------------------------------------------------------------------------------------------------------------
CAPITAL CERTIFICATE TRANSACTIONS (Note 5):
Redemptions of Class A Preferred certificates
(2,585,848 certificates in 1999) - (2,585,848)
DISTRIBUTIONS TO CLASS B CERTIFICATEHOLDERS (Note 5) (1,557,058) (1,175,906)
----------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from
capital certificate transactions (1,557,058) (3,761,754)
----------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS (391,955) (1,534,645)
----------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 17,724,801 19,259,446
----------------------------------------------------------------------------------------------------------------------
End of period $ 17,332,846 $ 17,724,801
----------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING ACCOUNTANTS' COMPILATION REPORT AND NOTES TO FINANCIAL STATEMENTS.
</TABLE>
6
<PAGE>
COLLEGE AND UNIVERSITY
FACILITY LOAN TRUST TWO
SELECTED FINANCIAL HIGHLIGHTS FOR EACH
CLASS B CERTIFICATE OUTSTANDING
THROUGHOUT THE PERIODS INDICATED
(NOTES 1 AND 5)
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED
MAY 31, Years Ended November 30,
----------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $10.05 $9.45 $8.17 $7.27 $6.42 $5.69
NET INVESTMENT INCOME .66 1.38 1.63 1.64 1.75 1.86
PROVISION FOR LOAN LOSSES - - (.01) (.11) (.11) (.24)
DIVIDENDS TO CLASS A PREFERRED
CERTIFICATEHOLDERS:
From net investment income - - - - - (.43)
As tax return of capital - (.11) (.34) (.63) (.79) (.46)
DISTRIBUTION TO CLASS B
CERTIFICATEHOLDERS:
As tax return of capital (.88) (.67) - - - -
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, end of period $ 9.83 $10.05 $9.45 $8.17 $7.27 $6.42
----------------------------------------------------------------------------------------------------------------------
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 $ - $ - $ 2,585,848 $5,422,117 $ 8,629,880 $10,534,185
NET ASSETS APPLICABLE TO CLASS B
CERTIFICATES, end of period $17,332,846 $17,724,801 $16,673,598 $14,401,615 $12,816,146 $11,324,698
----------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Ratio of operating expenses to average
net assets applicable to
Class B certificates 71.34%(b)(c) 78.42%(b) 99.83%(b) 123.64%(b) 150.97%(b) 186.94%(b)
Ratio of net investment income
to average net assets applicable
to Class B certificates 13.30%(c) 14.13% 18.57% 21.29% 25.54% 30.76%
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
</TABLE>
(a) The Trust's investments are recorded at amortized cost as discussed in Note
2. Accordingly, the financial statements do not reflect the market value of
such investments. For this reason, management believes that no meaningful
information can be provided regarding "Total Investment Return" and has not
included information under that heading.
(b) Excluding interest expense, the ratio of operating expenses to average net
assets applicable to Class B Certificates was 2.44%(c), 2.57%, 2.32%,
2.56%, 2.67% and 4.70% in 2000, 1999, 1998, 1997, 1996 and 1995,
respectively.
(c) Annualized.
SEE ACCOMPANYING ACCOUNTANTS' COMPILATION
REPORT AND NOTES TO FINANCIAL STATEMENTS.
7
<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 Bank One Trust Company, NA, formerly 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 account-ing.
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, 2000 was
approximately $57,630,000. As a result of prepayments of Loans in the six months
ended May 31, 2000, additional interest income of approximately $179,000 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, 2000,
one loan has been placed on nonaccrual status.
(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 Morgan Guaranty Trust Company's option. These investments are
carried at cost. These investment agreements terminate on the earlier of June 1,
2018 or the date on which the Bonds are paid-in-full.
(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 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 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 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 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 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 of November 30, 1999, all tax earnings and profits have been distributed.
Accordingly, all accumulated undistributed net investment income has been
reclassified to paid-in capital. 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, 2000, however, the amount cannot be reasonably estimated at May 31,
2000.
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, 2000 consist of the following:
<TABLE>
<CAPTION>
Outstanding Unamortized Carrying
Interest Stated Principal Discount Amount
Type Rate Maturity (000s) (000s) (000s)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sequential 4.00% June 1, 2002 $ 12,167 $ 89 $ 12,078
Sequential 4.00 June 1, 2018 149,370 36,019 113,351
--------------------------------------------------------------------------------
$161,537 $36,108 $125,429
--------------------------------------------------------------------------------
</TABLE>
Interest on the Bonds is payable semiannually. On June 1, 2000, the Trust made a
principal payment of $8,701,721 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, 2000 after
taking into consideration actual Loan prepayments, Defaulted Loans and the
Maximum Principal Distribution Amount, as defined in the Indenture, are as
follows:
<TABLE>
<CAPTION>
Amount
FISCAL YEAR (000s)
--------------------------------------------------------------------------------
<S> <C>
2000 $ 8,702
2001 18,138
2002 18,206
2003 13,870
2004 12,735
Thereafter 89,886
--------------------------------------------------------------------------------
Total $161,537
--------------------------------------------------------------------------------
</TABLE>
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 on the Bonds 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
earned 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 six months ended
May 31, 2000, GMAC's fees totaled $76,620, which includes other related expenses
of $5,606.
(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:
The Owner Trustee, in its capacities as manager of the Trust and as Owner
Trustee, earned fees of $7,500 and $6,250, respectively, for the six months
ended May 31, 2000. In addition, the Owner Trustee incurred $125 for
out-of-pocket expenses.
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, 2000, Bond
Trustee fees amounted to $11,854. In addition, the Bond Trustee incurred
$2,669 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. Dividends on the Class A Preferred certificates are payable in cash at the
rate of 13.65% per annum from amounts received by the Owner Trustee pursuant to
the Declaration of Trust. The Class A Preferred certificates are required to be
redeemed by the Trust on any Distribution Date (defined below) 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.
As the Class A Preferred certificates have been fully redeemed, 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.
On June 2, 2000 a distribution of $1,557,058 was made to the Class B
certificateholders. This payment is reflected as a liability in the accompanying
balance sheet.
The certificateholders shall each be entitled to one vote per certificate.
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
6. ALLOWANCE FOR
LOAN LOSSES
An analysis of the allowance for loan losses for the six months ended May 31,
2000 is summarized as follows:
<TABLE>
<S> <C>
Balance, beginning of period $ 1,132,376
Provision -
Charge-offs -
--------------------------------------------------------------------------------
Balance, end of period $ 1,132,376
--------------------------------------------------------------------------------
</TABLE>
At May 31, 2000, the recorded investment in the loan that is considered to be
impaired under SFAS 114 was approximately $70,000 with a related allowance for
loan loss of $49,000.
The average recorded investment in the impaired loan during the six months ended
May 31, 2000 was approximately $69,000. For the six months ended May 31, 2000,
no interest income was recognized on the impaired loan.
The amortized cost of the loan placed on nonaccrual status is approximately
$70,000 at May 31, 2000. See Note 2 (e), "Accounting for Impairment of a Loan
and Allowance for 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, 2000,
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>
2000 $ 12,251 $ 2,983 $ 15,234
2001 19,911 5,401 25,312
2002 19,530 4,734 24,264
2003 15,712 4,158 19,870
2004 14,816 3,667 18,483
Thereafter 105,108 20,544 125,652
--------------------------------------------------------------------------------
Total $ 187,328 $ 41,487 $ 228,815
--------------------------------------------------------------------------------
</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. As of
May 31, 2000, there were no Loans in Default.
The following analysis summarize the stratification of the loan portfolio by
type of collateral and institution as of May 31, 2000:
<TABLE>
<CAPTION>
Amortized
Number Cost
TYPE OF COLLATERAL of Loans (000s) %
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Loans secured by a
first mortgage 243 $ 71,388 55.0%
Loans not secured by
a first mortgage 144 58,310 45.0
--------------------------------------------------------------------------------
Total Loans 387 $ 129,698 100.0%
--------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING ACCOUNTANTS' COMPILATION REPORT
18
<PAGE>
COLLEGE AND UNIVERSITY
FACILITY LOAN TRUST TWO
NOTES TO FINANCIAL STATEMENTS
7. LOANS
(Continued)
<TABLE>
<CAPTION>
Amortized
Number Cost
TYPE OF INSTITUTION of Loans (000s) %
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Private 249 $ 71,327 55.0%
Public 138 58,371 45.0
--------------------------------------------------------------------------------
Total Loans 387 $ 129,698 100.0%
--------------------------------------------------------------------------------
</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.
SEE ACCOMPANYING ACCOUNTANTS' COMPILATION REPORT
19
<PAGE>
COLLEGE AND UNIVERSITY
FACILITY LOAN TRUST TWO
NOTES TO FINANCIAL STATEMENTS
7. LOANS
(Continued)
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 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' real 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, 2000 is as follows:
<TABLE>
<CAPTION>
Book Value Fair Value
(000s) (000s)
--------------------------------------------------------------------------------
<S> <C> <C>
Loans $ 128,566* $ 142,240
Investment Agreements:
Revenue Fund 13,498 14,385
Liquidity Fund 3,574 4,123
--------------------------------------------------------------------------------
$ 145,638 $ 160,748
--------------------------------------------------------------------------------
Bonds $ 125,429 $ 134,561
--------------------------------------------------------------------------------
</TABLE>
*Net of Allowance for Loan Losses of $1,132,376.
SEE ACCOMPANYING ACCOUNTANTS' COMPILATION REPORT
21
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
-----------------------
May 31, 2000
------------
(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)
------------ ------------------------------------ ------------ ---------- --------- -----------
COLLEGE AND UNIVERSITY LOANS (88.3%)
------------------------------------
-------------- A --------------
<S> <C> <C> <C> <C> <C>
$425 Alabama Agricultural and Mechanical University 3.000-3.750 07/01/2005 10.25 $346
1,795 Alabama Agricultural and Mechanical University 3.000 05/01/2018 10.27 1,050
137 Albion College 3.000 10/01/2009 10.56 98
523 Albright College 3.000 11/01/2015 10.23 332
20 Alcorn State University 3.500 11/01/2002 10.15 18
50 Allegheny College 3.000 07/01/2015 10.38 22
120 Alma College 3.750 04/01/2002 11.52 108
47 American International College 3.375 10/01/2002 10.84 43
70 Anderson University 3.500 03/01/2003 11.42 60
200 Anderson University 3.000 03/01/2006 11.19 153
35 Appalachian State University 3.500 07/01/2001 10.28 32
215 Arizona State University 3.125 09/01/2001 10.17 199
190 Arizona State University 3.375 10/01/2002 10.16 172
945 Arizona State University 3.000 04/01/2006 10.60 742
493 Arkansas State University 3.750 04/01/2005 10.75 405
2,095 Auburn University 3.000 12/01/2018 9.16 1,273
201 Azusa Pacific University 3.750 04/01/2015 10.88 127
-------------- B --------------
1,025 Baptist College at Charleston 3.000 03/01/2019 10.73 561
621 Baptist College at Charleston 3.000 03/01/2011 10.98 414
157 Becker Junior College 3.000 04/01/2005 11.21 125
73 Bellarmine College 3.625 05/01/2004 11.34 62
107 Benedict College 3.750 11/01/2004 10.75 91
787 Benedict College 3.000 11/01/2006 10.61 624
1,793 Benedict College 3.000 11/01/2020 10.36 994
1,568 Bentley College 3.000 11/01/2007 10.57 1,195
291 Bethany College 3.375 11/01/2012 10.54 200
275 Bethany College 3.000 11/01/2017 10.40 161
503 Bethany College 3.000 11/01/2012 10.40 334
12 Bethune-Cookman College 3.000 11/01/2002 10.74 11
148 Boston Architectural Center 3.750 11/01/2004 10.77 127
90 Bradford College 3.375 10/01/2001 10.85 70
272 Brandeis University 3.000 11/01/2011 10.64 184
110 Brevard College 3.000 11/01/2004 10.71 94
61 Brevard College 3.000 05/01/2006 11.12 47
78 Bryan College 3.500 04/01/2003 11.39 67
94 Buena Vista College 3.000 02/01/2006 11.23 72
-------------- C --------------
925 California Polytechnic State University 3.000 11/01/2006 10.05 718
305 California State University 3.000 11/01/2006 8.75 253
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 22
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
-----------------------
May 31, 2000
------------
(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>
$1,200 California State University 3.000 11/01/2013 8.93 $843
2,578 California State University 3.000 11/01/2019 8.99 1,600
50 Calvin College 3.000 11/01/2000 10.83 48
1,955 Cameron University 3.000 04/01/2007 10.16 1,502
85 Canisius College 3.375 05/01/2002 11.48 77
1,545 Canisius College 3.000 11/01/2017 10.40 909
130 Carnegie-Mellon University 3.500 11/01/2001 10.52 121
245 Carnegie-Mellon University 3.000 05/01/2009 10.73 174
977 Carnegie-Mellon University 3.000 11/01/2017 10.51 573
57 Carroll College 3.125 06/01/2000 10.75 54
344 Carroll College 3.750 06/01/2014 10.46 225
162 Carroll College 3.000 06/01/2018 10.15 94
412 Carroll College 3.750 03/01/2015 10.93 259
155 Case Western Reserve University 3.500 04/01/2003 11.39 133
228 Catawba College 3.000 12/01/2009 10.27 159
40 Central Missouri State University 3.125 07/01/2000 10.24 38
126 Central Missouri State University 3.375 07/01/2001 10.27 117
489 Central Missouri State University 3.625 07/01/2004 10.29 415
895 Central Missouri State University 3.000 07/01/2007 10.18 685
149 Champlain College 3.000 12/01/2013 10.19 94
540 Chapman College 3.000 10/01/2013 10.65 343
303 Chapman College 3.000 11/01/2005 10.63 245
212 Chapman College 3.000 11/01/2007 10.57 162
1,515 Chateau Community Housing Association 3.000 10/01/2012 10.51 1,001
60 Cisco Junior College 3.000 11/01/2005 10.04 50
110 Cisco Junior College 3.000 07/01/2005 10.15 89
5 Claflin College 3.125 04/01/2001 11.59 5
340 Clemson University 3.000 07/01/2005 9.51 284
135 Coker College 3.000 12/01/2009 10.04 95
66 College of Notre Dame of Maryland 3.375 11/01/2002 10.48 61
126 College of Our Lady of the Elms 3.375 10/01/2001 10.86 117
895 College of Saint Rose 3.000 05/01/2022 10.43 478
511 College of Saint Thomas 3.000 11/01/2009 10.53 368
35 College of Santa Fe 3.500 10/01/2001 10.86 32
189 College of Santa Fe 3.000 10/01/2005 10.66 153
591 College of Santa Fe 3.000 10/01/2018 10.43 343
1,000 College of the Holy Cross 3.625 10/01/2013 10.60 676
715 College of the Holy Cross 3.000 10/01/2006 10.63 560
27 College of the Virgin Islands 3.000 11/01/2002 10.15 24
70 College of the Virgin Islands 3.000 10/01/2003 10.16 61
207 Columbia College 3.625 07/01/2004 10.90 173
70 Columbia College 3.000 07/01/2006 10.80 55
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 23
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
-----------------------
May 31, 2000
------------
(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>
$124 Concordia College 3.000 04/01/2009 11.05 $90
705 Concordia College 3.000 05/01/2019 10.65 391
56 Cornell College 3.000 10/01/2005 10.66 46
318 Cumberland University 3.000 08/01/2017 10.52 185
-------------- D --------------
625 Daemen College 3.000 04/01/2016 10.77 380
183 Dakota Wesleyan University 3.000 10/01/2015 10.46 112
210 Dana College 3.000 04/01/2005 11.22 167
40 Dana College 3.500 04/01/2003 11.39 34
131 Dickinson College 3.000 05/01/2018 10.30 77
218 Dillard University 3.000 04/01/2008 11.09 162
38 Doane College 3.000 11/01/2000 10.83 36
200 Dormitory Authority State of NY
(New York University) 3.000 07/01/2000 8.95 192
577 Dowling College 3.000 10/01/2010 10.75 399
7 Drexel University 2.875 05/01/2001 11.57 6
1,170 Drexel University 3.500 05/01/2014 10.53 766
273 Drury College 3.000 04/01/2015 10.63 170
464 Drury College 3.000 10/01/2010 10.75 321
1,041 D'Youville College 3.000 04/01/2018 10.90 580
-------------- E --------------
1,216 East Texas State University 3.500 03/01/2002 9.48 1,086
1,549 East Texas State University 3.000 03/01/2002 9.60 1,366
42 East Texas State University 3.000 11/01/2000 9.26 41
390 Elizabeth City State University 3.000 10/01/2017 10.02 239
450 Embry-Riddle Aeronautical University 3.000 09/01/2007 10.64 340
158 Emmanuel College 3.000 11/01/2013 10.45 101
-------------- F --------------
1,640 Fairleigh Dickinson University 3.000 11/01/2017 10.39 966
180 Florida Agricultural and Mechanical University 3.625 07/01/2004 10.29 152
183 Florida Atlantic University 3.500 07/01/2004 10.27 157
315 Florida Atlantic University 3.000 07/01/2006 10.18 248
182 Florida Institute of Technology 3.000 11/01/2009 10.53 131
128 Florida State University 3.500 06/01/2001 8.44 120
645 Florida State University 3.000 01/01/2009 9.40 489
26 Fort Hays State University 3.500 10/01/2001 10.19 25
83 Fort Hays State University 3.625 10/01/2002 10.18 75
155 Fort Hays State University 3.000 10/01/2007 10.08 120
510 Fort Lewis College 3.000 10/01/2006 10.09 406
-------------- G --------------
695 Gannon University 3.000 11/01/2011 10.49 473
202 Gannon University 3.000 12/01/2022 10.13 107
67 Gavilan College 3.000 04/01/2006 10.59 52
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 24
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
-----------------------
May 31, 2000
------------
(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>
$23 George Fox College 3.500 04/01/2001 11.25 $21
763 George Fox College 3.000 07/01/2018 10.64 434
459 Georgetown College 3.000 12/01/2008 10.04 333
820 Georgetown College 3.000 12/01/2009 10.05 579
2,809 Georgetown University 3.000 11/01/2020 10.36 1,556
7,165 Georgetown University 4.000 11/01/2020 10.52 4,305
986 Georgetown University 3.000 05/01/2005 10.86 807
410 Georgia Education Authority Board of Regents
of the University System of Georgia 3.375 01/01/2003 10.60 357
43 Grambling State University 3.000 11/01/2000 10.11 41
-------------- H --------------
373 Hampshire College 3.000 07/01/2013 10.75 236
1,343 Hampshire College 3.000 02/01/2014 10.70 841
150 Harcum Junior College 3.375 11/01/2002 10.77 135
560 Harper Grace Hospital 3.625 04/01/2005 11.26 453
129 Hesston College 3.000 04/01/2006 11.14 99
318 High Point College 3.000 12/01/2010 10.26 220
1,839 Hinds Junior College 3.000 04/01/2013 10.42 1,212
56 Hiwassee College 3.375 01/01/2003 11.58 49
195 Hiwassee College 3.000 09/15/2018 10.58 111
1,923 Hofstra University 3.000 11/01/2012 10.61 1,267
285 Hood College 3.625 11/01/2014 10.54 189
380 Houston Tillotson College 3.500 04/01/2014 10.90 244
30 Huntingdon College 3.500 03/01/2002 11.54 27
245 Huntingdon College 3.000 10/01/2008 10.60 181
-------------- I --------------
135 Illinois Institute of Technology 3.000 03/01/2003 11.10 117
122 Indiana University 3.375 04/01/2001 10.06 114
300 Indiana University 3.500 04/01/2001 10.06 280
948 Indiana University 3.750 12/01/2003 8.84 838
113 Inter American University of Puerto Rico 3.000 09/01/2007 10.66 87
2,402 Inter American University of Puerto Rico 3.000 01/01/2017 10.94 1,391
-------------- J --------------
1,640 James Madison University 3.000 06/01/2009 10.49 1,169
378 Johnson & Wales College 3.000 11/01/2013 10.59 243
175 Johnson C. Smith University 3.000 05/01/2005 11.18 140
25 Judson College 3.750 07/01/2004 10.92 21
-------------- K --------------
141 Kansas State University 3.375 10/01/2002 9.12 130
635 Kansas State University 3.625 04/01/2004 9.77 547
70 Kendall College 3.375 10/01/2002 10.82 63
224 Kendall College 3.000 10/01/2008 10.59 165
116 Kent State University 3.500 12/01/2000 8.90 108
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 25
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
-----------------------
May 31, 2000
------------
(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>
$285 Knox College 3.000 04/01/2006 11.15 $219
-------------- L --------------
285 LaGrange College 3.000 03/01/2009 11.06 200
259 Langston University 3.375 10/01/2003 10.15 228
885 Langston University 3.000 04/01/2007 10.56 672
454 Lassen Junior College District 3.000 04/01/2020 10.27 254
875 Leland Stanford Junior College 3.375 05/01/2003 11.33 752
164 Lenoir Rhyne College 3.000 12/01/2006 10.04 127
82 Linfield College 3.000 10/01/2017 10.44 48
593 Long Island University 3.750 05/01/2005 11.22 482
200 Long Island University 3.000 11/01/2009 10.69 143
699 Long Island University 3.000 11/01/2009 10.69 499
257 Long Island University 3.750 04/01/2003 11.41 222
545 Long Island University 3.625 06/01/2014 10.49 355
96 Long Island University 3.750 10/01/2004 10.79 81
193 Louisiana State University 3.500 07/01/2001 8.65 186
826 Louisiana State University 3.625 07/01/2004 9.04 720
338 Louisiana State University 3.000 07/01/2005 8.84 288
305 Louisiana State University 3.000 07/01/2006 8.87 255
173 Louisiana State University 3.000 07/01/2001 8.62 162
47 Lycoming College 3.500 05/01/2001 11.22 44
229 Lycoming College 3.625 05/01/2014 10.64 149
310 Lycoming College 3.750 05/01/2015 10.62 199
478 Lynchburg College 3.750 05/01/2015 10.64 311
625 Lynchburg College 3.000 05/01/2018 10.68 356
-------------- M --------------
260 MacAlester College 3.375 05/01/2002 11.41 232
437 MacAlester College 3.000 05/01/2020 10.46 244
535 Marian College 3.000 10/01/2016 10.45 321
92 Marquette University 3.000 07/31/2024 10.59 46
393 Mary Baldwin College 3.375 05/01/2012 10.68 267
600 Marymount University 3.000 05/01/2016 10.52 359
665 McLennan Community College 3.000 04/01/2006 10.49 524
46 McNeese State University 3.500 10/01/2001 10.18 43
944 Memorial Hospital for Cancer and Allied Diseases 3.375 04/01/2012 10.68 638
29 Menlo College 3.125 04/01/2001 11.53 27
461 Mercer University 3.000 05/01/2014 10.58 292
1,440 Mercy College of Detroit 3.625 10/01/2013 10.59 960
35 Merrimack College 3.000 04/15/2019 10.53 26
118 Merrimack College 3.000 04/15/2008 10.79 67
50 Middlebury College 3.375 10/01/2002 11.12 45
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 26
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
-----------------------
May 31, 2000
------------
(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>
$77 Midland Lutheran College 3.000 04/01/2005 11.20 $61
576 Millsaps College 3.000 11/01/2021 10.34 313
1,520 Mississippi State University 3.000 12/01/2020 9.64 862
54 Mississippi Valley State University 3.500 07/01/2001 10.28 50
72 Molloy College 3.375 10/01/2002 10.81 64
220 Moravian College 3.375 11/01/2012 10.52 149
745 Morehouse College 3.000 07/01/2010 10.50 490
2,168 Morgan State University 3.000 11/01/2014 10.56 1,358
196 Morris Brown College 3.750 05/01/2007 11.12 163
1,737 Morris Brown College 2.750-3.750 05/01/2018 10.89 1,072
580 Morris College 3.000 11/01/2009 10.53 417
34 Muhlenberg College 3.000 11/01/2000 10.50 33
-------------- N --------------
150 New England College 3.000 04/01/2016 10.77 88
625 Newark Beth Israel Hospital 3.625 01/01/2014 11.06 394
66 NIACC Dormitories, Inc. 3.000 10/01/2012 10.27 44
2,793 Norfolk State University 3.000 12/01/2021 9.77 1,551
North Carolina Agricultural and
597 Technical State University 3.000 05/01/2014 10.34 378
485 North Carolina State University 3.625 09/01/2004 8 435
147 North Carolina State University 3.125 09/01/2001 7.58 140
181 North Carolina State University 3.500 09/01/2001 7.63 172
110 North Greenville College 3.000 11/01/2003 10.72 97
56 Northeast Louisiana University 3.500 04/01/2001 10.28 52
188 Northeast Missouri State University 3.375-3.500 05/01/2002 11 169
2,965 Northeastern University 3.000 05/01/2018 10.53 1,711
100 Northeastern University 3.000 05/01/2004 10.97 84
50 Northwestern State University 3.125 10/01/2000 10.15 49
345 Nova University 3.000 12/01/2007 10.04 258
-------------- O -------------
274 Occidental College 3.000 10/01/2019 10.41 154
205 Olympic Community College 3.000 10/01/2008 10.07 154
28 Ouachita Baptist University 3.000 12/01/2006 10.04 22
-------------- P -------------
920 Paine College 3.000 10/01/2016 10.45 553
2,368 Philadelphia College of Art 3.000 01/01/2022 10.62 1,239
490 Pine Manor College 3.625 10/01/2003 10.80 426
163 Polytechnic University 3.375 10/01/2011 10.59 113
185 Post College 3.000 04/01/2010 10.76 129
960 Purdue University 3.625 07/01/2004 9.33 828
283 Purdue University 3.000 07/01/2005 9.26 239
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 27
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
-----------------------
May 31, 2000
------------
(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>
-------------- Q -------------
$19 Queens College 3.500 11/01/2001 10.88 $18
131 Queens College 3.625 07/01/2004 10.90 110
-------------- R -------------
280 Randolph-Macon College 3.000 05/01/2010 10.72 197
98 Randolph-Macon College 3.000 11/01/2000 10.50 94
510 Regis College (Denver) 3.000 11/01/2012 10.47 338
81 Regis College (Weston) 3.375 10/01/2002 10.85 75
200 Rhode Island College 3.000 10/01/2005 10.09 164
15 Rider College 3.500 05/01/2001 11.57 14
118 Rider College 3.375 05/01/2002 11.44 105
27 Rider College 3.125 11/01/2000 10.86 26
1,805 Rider College 3.625 11/01/2013 10.42 1,222
422 Rider College 3.000 05/01/2017 10.70 244
92 Rio Grande College 3.000 03/30/2009 10.93 66
645 Rutgers, The State University 3.750 05/01/2016 9.19 442
75 Rutgers, The State University 3.125 05/01/2001 8.89 71
-------------- S -------------
75 Saint Ambrose University 3.000 11/01/2001 10.78 69
65 Saint Anselm College 3.375 10/01/2001 10.88 61
72 Saint John's University 3.000 10/01/2002 10.76 64
148 Saint Louis College of Pharmacy 3.375 10/01/2004 10.74 124
23 Saint Louis University 3.125 10/01/2000 10.90 22
294 Saint Louis University 3.500 11/01/2002 10.80 266
84 Saint Mary's College 3.000 03/01/2005 11.25 67
408 Saint Mary's College 3.000 06/01/2020 10.14 226
1,858 Saint Michael's College 3.000 05/01/2013 10.60 1,209
101 Saint Norbert College 3.375 04/01/2002 11.52 92
158 Saint Norbert College 3.625 04/01/2004 11.33 132
325 Saint Norbert College 3.000 04/01/2007 11.10 243
474 Saint Paul's College 3.000 11/01/2014 10.56 297
600 Saint Vincent College 3.500 05/01/2013 10.86 391
180 Sam Houston State University 3.500 10/01/2001 9.10 170
815 San Diego State University 3.000 11/01/2007 10.04 652
1,195 Sangamon State University 3.000 11/01/2018 10.12 718
190 Seattle University 3.500 11/01/2001 10.84 178
480 Seattle University 3.000 11/01/2008 10.55 355
110 Seton Hall University 3.000 11/01/2000 10.83 106
328 Seton Hill College 3.625 11/01/2014 10.53 215
9 Sierra College 3.375 04/01/2002 10.87 8
314 Simpson College 3.000 07/01/2016 10.58 186
380 South Dakota School of Mines and Technology 3.000 04/01/2018 10.30 219
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 28
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
-----------------------
May 31, 2000
------------
(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>
$127 South Dakota School of Mines and Technology 3.625 04/01/2002 10.85 $115
24 South Plains College 3.500 10/01/2002 10.18 22
72 South Plains College 3.625 10/01/2004 10.17 62
50 South Plains College 3.000 10/01/2005 10.10 42
225 Southeast Missouri State University 3.500 04/01/2002 10.82 202
976 Southeast Missouri State University 3.000 04/01/2007 10.58 753
665 Southeastern Oklahoma State University 3.000 04/01/2009 10.51 479
106 Southern Arkansas University 3.500 10/01/2002 10.23 96
505 Southern Methodist University 3.000 10/01/2007 10.61 383
190 Southern Nazarene University 3.750 04/01/2005 11.27 154
455 Southwest Missouri State College 3.375 10/01/2002 10.17 417
2,305 Southwest Texas State University 3.000 10/01/2015 9.51 1,495
7 Southwestern Christian College 3.000 11/01/2000 10.83 7
4 Spalding University 3.125 09/01/2000 10.95 4
331 Spalding University 3.000 09/01/2007 10.66 256
443 Springfield College 3.500 05/01/2013 10.67 298
68 Springfield College 3.000 05/15/2005 10.11 56
155 State Center Community College 3.000 10/01/2004 10.10 131
1,897 Stephen F. Austin State University 3.375-3.500 10/01/2012 9.57 1,348
158 Stetson University 3.000 01/01/2006 11.25 120
106 Stillman College 3.750 02/01/2004 11.42 88
313 Stonehill College 3.000 10/01/2006 10.64 246
175 SUNY, Mohawk Valley Community College 3.000 04/01/2005 10.26 130
-------------- T -------------
28 Talladega College 3.375 12/01/2001 10.08 25
402 Talladega College 3.000 12/01/2012 10.24 264
267 Taylor University 3.000 10/01/2012 10.50 176
816 Taylor University 3.000 10/01/2013 10.49 529
646 Texas A & I University 3.000 07/01/2009 9.57 479
91 Texas Southern University 3.500 04/01/2001 10.89 90
500 Texas Southern University 3.500 04/01/2013 10.45 351
448 Transylvania University 3.000 11/01/2010 10.51 314
690 Trinity University 3.625 09/01/2004 10.82 580
192 Tufts University 3.375 10/01/2001 10.87 179
2,300 Tufts University 3.000 10/01/2021 10.39 1,244
390 Tulane University of Louisiana 3.500 10/01/2001 9.06 367
-------------- U -------------
33 Union College 3.000 11/01/2002 10.74 30
1,780 University of Alabama in Birmingham 3.000 11/01/2008 7.97 1,451
87 University of Alaska 3.375 04/01/2002 10.82 79
231 University of Alaska 3.500 04/01/2003 10.80 207
83 University of Arkansas at Little Rock 3.500 04/01/2001 10.04 80
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 29
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
-----------------------
May 31, 2000
------------
(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>
$169 University of Arkansas at Little Rock 3.000 11/01/2009 9.42 $129
443 University of Central Arkansas 3.000 04/01/2005 10.69 371
485 University of Central Florida 3.000 10/01/2007 10.08 375
150 University of Chicago 3.500 12/01/2001 10.10 134
49 University of Chicago 3.375 12/01/2001 10.08 44
22 University of Chicago 3.500 12/01/2002 10.11 19
50 University of Delaware 3.125 11/01/2000 8.84 49
23 University of Delaware 3.375 11/01/2000 8.81 22
1,100 University of Delaware 3.000 11/01/2006 9.08 904
669 University of Delaware 3.000 12/01/2018 8.81 422
2,225 University of Florida 3.000 07/01/2014 10.15 1,419
89 University of Hartford 3.000 11/01/2001 10.78 82
40 University of Hawaii at Manoa 3.500 10/01/2001 10.18 37
12 University of Lowell 3.000 11/01/2000 7.62 12
2,100 University of Michigan 3.750 10/01/2005 9.51 1,784
293 University of Missouri 3.375 05/01/2002 10.03 273
39 University of Missouri 2.875 11/01/2000 9.25 38
35 University of Montevallo 3.125 11/01/2000 9.27 34
667 University of North Carolina 3.000 11/01/2005 8.81 572
525 University of North Carolina 3.000 01/01/2008 9.50 400
43 University of North Carolina 3.000 01/01/2007 9.50 34
987 University of Notre Dame 3.000 02/15/2019 10.62 555
745 University of Portland 3.375 04/01/2013 10.88 489
2 University of Puerto Rico, Rio Piedras Campus 3.125 06/01/2000 9.17 2
1,709 University of Puerto Rico, Rio Piedras Campus 3.000 06/01/2011 9.39 1,213
21 University of Rhode Island 3.000 10/01/2001 9.68 20
647 University of Saint Thomas 3.000 10/01/2019 10.41 364
215 University of Santa Clara 3.125 04/01/2002 11.44 190
100 University of Santa Clara 3.375 04/01/2002 11.45 89
690 University of Santa Clara 3.625 04/01/2004 11.33 575
17 University of Scranton 3.125 11/01/2000 10.84 16
107 University of South Dakota 3.500 10/01/2001 9.59 100
790 University of South Florida 3.750 07/01/2005 10.30 652
306 University of Steubenville 3.125 04/01/2010 10.98 210
1,261 University of Vermont 3.000 07/01/2016 8.95 829
100 University of Vermont 3.375 07/01/2001 8.33 95
1,175 University of Vermont 3.000 07/01/2019 9.06 722
200 University of Washington 3.500 08/01/2002 9.07 183
253 University of Washington 3.000 08/01/2003 9.06 223
1,510 University Student Co-Operative Association 3.000 04/01/2019 10.70 831
49 Ursinus College 3.000 10/01/2000 10.86 47
487 Utica College 3.000 11/01/2009 10.53 351
-------------- V -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 30
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
-----------------------
May 31, 2000
------------
(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>
$445 Vermont State College 3.000 06/01/2008 9.02 $345
253 Vermont State College 3.000 07/01/2014 9.30 169
1,125 Villanova University 3.000 04/01/2019 10.70 620
3,770 Vincennes University 3.000 06/01/2023 9.02 2,160
2,507 Virginia Commonwealth University 3.000 06/01/2011 10.01 1,727
890 Virginia Commonwealth University 3.000 06/01/2004 10.08 746
321 Virginia Wesleyan College 3.000 11/01/2009 10.54 235
190 Virginia Wesleyan College 3.000 11/01/2010 10.51 133
-------------- W -------------
10 Waldorf College 3.125 07/01/2000 10.97 10
209 Waldorf College 3.000 07/01/2005 10.77 167
29 Wartburg College 3.500 10/01/2001 10.87 27
146 Wartburg College 3.750 04/01/2011 11.00 101
530 Washington State University 3.625 04/01/2004 10.02 454
340 Washington State University 3.750 04/01/2004 10.03 292
520 Washington State University 3.375 04/01/2003 10.02 457
147 Washington University 3.500 10/01/2001 10.91 140
210 Wesley College 3.375 05/01/2013 10.88 139
50 West Kern Junior College District 3.625 04/01/2004 10.73 42
430 West Valley College 3.000 04/01/2009 10.50 310
432 West Virginia Wesleyan College 3.000 05/01/2015 10.75 262
244 Western Carolina University 3.625 05/01/2003 10.75 215
135 Western Washington University 3.500 10/01/2001 10.18 126
520 Western Washington University 3.625 10/01/2004 10.18 445
390 Western Washington University 3.750 10/01/2005 10.19 325
27 Westmoreland Hospital Association 3.500 07/01/2001 10.98 25
785 Wheaton College 3.500 04/01/2013 10.70 516
91 Wheeling College 3.500 05/01/2001 11.23 84
76 Wheeling College 3.000 11/01/2007 10.59 58
25 Wheelock College 3.000 05/01/2011 10.23 17
17 Wichita State University 3.000 10/01/2000 9.29 16
735 Wittenberg University 3.000 05/01/2015 10.76 443
235 Wittenberg University 3.000 11/01/2017 10.39 139
44 Wooster Business College 3.000 03/30/2009 10.88 32
34 Worcester Polytechnic Institute 3.375 04/01/2001 11.57 31
579 Wright State University 3.000 05/01/2009 9.89 434
-------------- Y -------------
348 York Hospital 3.000 05/01/2020 10.64 190
-------- -------
187,328 Total College and University Loans 129,698
--------
Allowance for Loan Losses 1,132
-------
Net Loans of the Trust 128,566
-------
INVESTMENT AGREEMENTS (11.7%)
Morgan Guaranty Trust Company -
3,574 Liquidity Fund 7.750 06/01/2018 7.750 3,574
Morgan Guaranty Trust Company -
13,498 Revenue Fund 7.050 06/01/2018 7.050 13,498
-------- -------
17,072 Total Investment Agreements 17,072
-------- -------
204,400 Total Investments (100.0%) 145,638
-------- -------
-------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 31
