Year 2000
The services provided to the Trust by the Owner Trustee, the Bond Trustee and
the Servicer, as well as the ability of the colleges and universities to repay
their loans owned by the Trust, depend on the smooth functioning of their
computer systems and those of their outside service providers. Computer software
systems in use today may not be able to distinguish the Year 2000 from the Year
1900 because of the way dates are encoded and calculated.
The failure of any computer system used by key service providers to the Trust to
properly distinguish the Year 2000 could impact the ability of the Trust to
receive and process loan payments, receive or remit funds or invest its funds,
among other services which it obtains from its service providers. The failure of
any computer system used by significant borrowers could impact their ability to
make loans payments in accordance with the terms of their loan documents. The
Trust cannot control the Year 2000 compliance programs of its key service
providers or significant borrowers.
The Trust will continue to evaluate the reports received periodically from its
key service providers to monitor any compliance issues. In the event the Trust
receives information that indicates there is a material potential for not
receiving compliant services from these providers, the Trust intends to develop
appropriate contingency plans. At this time there can be no assurance that there
will be no adverse impact on the Trust. The obligation to make any necessary
adaptations to their computer systems is the responsibility of the service
provider that maintains the system. The Trust does not expect to incur any
material expense in that regard.
The Trust will continue to evaluate the reports received periodically from
various significant borrowers. The Trust has received no information from any
significant borrowers of any prospective inability to make the loan payments due
the Trust on account of Year 2000 compliance issues. The Trust can give no
assurances that the ability of the colleges and universities to repay the loans
owned by the Trust will not be affected by Year 2000 issues. In the event loan
payments are not received in a timely manner, payment to certificateholders
and/or bondholders may be impaired
<PAGE>
College and University
Facility Loan Trust Two
Financial Statements
November 30, 1999
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To State Street Bank and Trust Company, Owner Trustee of
College and University Facility Loan Trust Two:
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, 1999, the related statements of operations
and cash flows for the year then ended, 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 and selected financial highlights. Our procedures
included confirmation of the Loans and Investments as of November 30, 1999 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,
1999, the results of its operations and its cash flows for the year then ended,
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.
/s/ Arthur Andersen, LLP
Boston, Massachusetts
January 5, 2000
<PAGE>
College and University
Facility Loan Trust Two
Balance Sheet
<TABLE>
<CAPTION>
=====================================================================================================
November 30, 1999
- -----------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments, at amortized cost, net of allowance for loan losses of
$1,132,376 (Notes 1, 2, 6, 7 and 8, and Schedule of Investments) $ 155,023,461
Cash 47,987
Interest receivable 1,460,676
Deferred bond issuance costs (Note 2) 600,399
- -----------------------------------------------------------------------------------------------------
Total assets 157,132,523
=====================================================================================================
Liabilities
Bonds payable, net of unamortized discount (Notes 3 and 8) 134,169,298
Interest payable (Note 3) 3,460,761
Accrued expenses and other liabilities 181,577
Class A dividends payable (Note 5) 26,845
Payable for redemption of Class A Preferred certificates (Note 5) 393,335
Distribution payable to Class B certificateholders (Note 5) 1,175,906
- -----------------------------------------------------------------------------------------------------
Total liabilities 139,407,722
- -----------------------------------------------------------------------------------------------------
Net Assets
Class B certificates, par value $1 - authorized, issued
and outstanding - 1,763,800 certificates (Note 5) 1,763,800
Distributions in excess of tax earnings (Notes 2 and 5) (4,896,672)
Paid-in capital (Note 2) 20,857,673
- -----------------------------------------------------------------------------------------------------
Total net assets applicable to Class B certificateholders 17,724,801
- -----------------------------------------------------------------------------------------------------
Total net assets $ 17,724,801
=====================================================================================================
Net asset value per Class B certificate
(based on 1,763,800 certificates outstanding) $ 10.05
=====================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
College and University
Facility Loan Trust Two
Statement of Operations
<TABLE>
<CAPTION>
=================================================================================
Year ended November 30, 1999
=================================================================================
<S> <C>
Investment income:
Interest income (Note 2) $ 15,918,576
- ---------------------------------------------------------------------------------
Expenses:
Interest expense (Notes 2 and 3) 13,045,758
Servicer fees (Note 4) 179,021
Trustee fees (Note 4) 57,165
Other trust and bond administration expenses 206,194
- ---------------------------------------------------------------------------------
Total expenses 13,488,138
- ---------------------------------------------------------------------------------
Net investment income 2,430,438
- ---------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,430,438
Dividends to Class A Preferred certificateholders (203,329)
- ---------------------------------------------------------------------------------
Net increase in net assets applicable to Class B
certificateholders resulting from operations $ 2,227,109
=================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
College and University
Facility Loan Trust Two
Statement of Cash Flows
<TABLE>
<CAPTION>
=================================================================================
<S> <C>
Year ended November 30, 1999
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Interest received $ 7,630,436
Interest paid (7,581,077)
Operating expenses paid (504,792)
- --------------------------------------------------------------------------------
Net cash used for operating activities (455,433)
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Net decrease in funds held under investment agreements 3,992,197
Principal payments on Loans 23,994,553
- --------------------------------------------------------------------------------
Net cash provided by investing activities 27,986,750
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Principal repayments on Bonds (23,595,654)
Redemptions of Class A Preferred certificates (3,518,285)
Dividends on Class A Preferred certificates (443,452)
- --------------------------------------------------------------------------------
Net cash used for financing activities (27,557,391)
- --------------------------------------------------------------------------------
Net decrease in cash (26,074)
Cash, beginning of year 74,061
- --------------------------------------------------------------------------------
Cash, end of year $ 47,987
================================================================================
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 $ 2,430,438
Decrease in interest receivable 151,795
Decrease in accrued expenses and other liabilities (62,412)
Decrease in Bond interest payable (471,913)
Amortization of original issue discount on Bonds 5,832,533
Amortization of purchase discount on Loans (8,439,936)
Amortization of deferred Bond issuance costs 104,062
- --------------------------------------------------------------------------------
Net cash used for operating activities $ (455,433)
================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
College and University
Facility Loan Trust Two
Statements of Changes in Net Assets
(Note 2(f))
<TABLE>
<CAPTION>
====================================================================================================================
Years ended November 30, 1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
From operations:
Net investment income $ 2,430,438 $ 2,886,100
Provision for loan losses -- (22,320)
Dividends to certificateholders (Notes 2 and 5):
Class A Preferred certificateholders ($.1365 per certificate annually):
From net investment income -- --
As tax return of capital (203,329) (591,798)
- --------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Class B
certificateholders resulting from operations 2,227,109 2,271,982
- --------------------------------------------------------------------------------------------------------------------
Capital certificate transactions (Note 5):
Redemptions of Class A Preferred certificates
(2,585,848 and 2,836,268 certificates in 1999 and
1998, respectively) (2,585,848) (2,836,268)
Distributions to Class B certificateholders (Note 5) (1,175,906) --
- --------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from
capital certificate transactions (3,761,754) (2,836,268)
- --------------------------------------------------------------------------------------------------------------------
Net decrease in net assets (1,534,645) (564,286)
Net assets:
Beginning of year 19,259,446 19,823,732
- --------------------------------------------------------------------------------------------------------------------
End of year $ 17,724,801 $ 19,259,446
====================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
College and University
Facility Loan Trust Two
Selected Financial Highlights for Each
Class B Certificate Outstanding
Throughout the Years Indicated
(Notes 1 and 5)
<TABLE>
<CAPTION>
====================================================================================================================================
Years ended November 30, 1999 1998 1997 1996 1995
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.45 $ 8.17 $ 7.27 $ 6.42 $ 5.69
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 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 (.67) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 10.05 $ 9.45 $ 8.17 $ 7.27 $ 6.42
====================================================================================================================================
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 $ -- $ 2,585,848 $ 5,422,117 $ 8,629,880 $10,534,185
Net assets applicable to Class B
certificates, end of year $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 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 14.13% 18.57% 21.29% 25.54% 30.76%
Number of Class B certificates
outstanding, end of year 1,763,800 1,763,800 1,763,800 1,763,800 1,763,800
</TABLE>
(a) The Trust's investments are recorded at amortized cost as discussed in Note
2. Accordingly, the financial statements do not reflect the market value of
such investments. For this reason, management believes that no meaningful
information can be provided regarding "Total Investment Return" and has not
included information under that heading.
(b) Excluding interest expense, the ratio of operating expenses to average net
assets applicable to Class B certificates was 2.57%, 2.32%, 2.56%, 2.67%
and 4.70% in 1999, 1998, 1997, 1996 and 1995, respectively.
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
1. Organization 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.
8
<PAGE>
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
1. Organization and Business (Continued)
All payments on the Loans and earnings under the investment agreements and
any required transfers from the Expense and Liquidity Funds are deposited
to the credit of the Revenue Fund held by the Bond Trustee as defined
within, and in accordance with, the Indenture. On each bond payment date,
amounts on deposit to the credit of the Revenue Fund are applied in the
following order of priority: to pay amounts due on the Bonds, to pay
administrative expenses not previously paid from the Expense Fund, to fund
the Expense Fund to the Expense Fund Requirement and to fund the Liquidity
Fund to the Liquidity Fund Requirement. Any funds remaining in the Revenue
Fund on such payment date will be used to further pay down the Bonds to the
extent of the maximum principal distribution amount, after which any
residual amounts are paid to the certificateholders in the order of
priority discussed in Note 5.
On the Closing Date, certificates were issued by the Trust to ED as partial
payments for the Loans. In December 1989, ED sold, through a private
placement, all of its ownership interest in the Trust.
2. Summary of Significant Accounting Policies
(a) College and University Facility Loans
The Loans were purchased and recorded at a discount below par. Pursuant to
a "no-action letter" that the Trust received from the Securities and
Exchange Commission, the Loans, included in Investments in the accompanying
balance sheet, are being accounted for under the amortized cost method of
accounting. Under this method, the difference between the cost of each Loan
to the Trust and the scheduled principal and interest payments is
amortized, assuming no prepayments of principal, and included in the
Trust's income by applying the Loan's effective interest rate to the
amortized cost of that Loan. The remaining balance of the purchase discount
on the Loans as of November 30, 1999 was approximately $61,678,000. As a
result of prepayments of Loans in the year ended November 30, 1999,
additional interest income of approximately $111,000 was recognized.
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 November 30, 1999, 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.
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.
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.
In accordance with SOP 93-2, the Trust reclassifies certain amounts from
undistributed net investment income to paid in capital. The cumulative
effect of such reclassifications was $4,896,672 as of November 30, 1999 and
is reported in net assets as a Distribution in Excess of Tax Earnings in
the accompanying balance sheet. This reclassification has no impact on the
net investment income or net assets of the Trust.
The reclassification primarily 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 allowance for loan
losses, dividends payable, amortization of bond issuance costs, and the
distribution payable to Class B certificateholders are not currently
deductible for tax purposes and are classified as accumulated deficit.
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 November 30, 1999 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 $ 23,668 $ 416 $ 23,252
Sequential 4.00 June 1, 2018 149,370 38,453 110,917
- --------------------------------------------------------------------------------------------------------------
$173,038 $ 38,869 $134,169
==============================================================================================================
</TABLE>
Interest on the Bonds is payable semiannually. On December 1, 1999, the
Trust made a principal payment of $11,500,367 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 (Continued)
The estimated aggregate principal payments on the Bonds at November 30,
1999 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 $ 19,518
2001 18,288
2002 18,344
2003 13,931
2004 12,798
Thereafter 90,159
---------------------------------------------------------------------------
Total $173,038
===========================================================================
</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.
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
year ended November 30, 1999, GMAC's fees totaled $179,021, which includes
other related expenses of $15,877.
(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, earned fees of $12,500 and $15,000, respectively, for
the year ended November 30, 1999. In addition, the Owner Trustee
incurred $1,501 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, 1999, Bond Trustee fees amounted to $27,068. In addition, the Bond
Trustee incurred $1,096 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. 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. On December 2, 1999, the Trust paid $420,180 to the
holders of Class A Preferred certificates, of which $26,845 was for payment
of dividends and $393,335 was a redemption of Class A Preferred
certificates, which fully redeemed the Class A Preferred certificates.
These payments are reflected as liabilities in the accompanying balance
sheet.
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 December 2, 1999 a distribution of $1,175,906
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.
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 year ended November
30, 1999 is summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Balance, beginning of period $1,132,376
Provision --
Charge-offs --
------------------------------------------------------------------------
Balance, end of period $1,132,376
========================================================================
</TABLE>
At November 30, 1999, the recorded investments in loans that are considered
to be impaired under SFAS 114 was approximately $68,000 with a related
allowance for loan losses of $47,000.
The average recorded investment in impaired loans during the year ended
November 30, 1999 was approximately $99,000. For the year ended November
30, 1999, no interest income was recognized on impaired loans.
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.
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,
1999, 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 $ 21,567 $ 6,130 $ 27,697
2001 20,026 5,420 25,446
2002 19,602 4,749 24,351
2003 15,787 4,170 19,957
2004 14,892 3,677 18,569
Thereafter 105,395 20,562 125,957
---------------------------------------------------------------
Total $197,269 $ 44,708 $241,977
===============================================================
</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 November 30, 1999, there were no Loans in Default.
The following analyses summarize the stratification of the loan portfolio
by type of collateral and institution as of November 30, 1999:
<TABLE>
<CAPTION>
Amortized
Number Cost
Type of Collateral of Loans (000s) %
===========================================================================
<S> <C> <C> <C>
Loans secured by a
first mortgage 253 $ 74,477 54.9%
Loans not secured by
a first mortgage 153 61,114 45.1
---------------------------------------------------------------------------
Total Loans 406 $ 135,591 100.0%
===========================================================================
</TABLE>
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 261 $ 74,402 54.9%
Public 145 61,189 45.1
---------------------------------------------------------------------------
Total Loans 406 $ 135,591 100.0%
===========================================================================
</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 (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.
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 November 30, 1999 is as follows:
<TABLE>
<CAPTION>
Book Value Fair Value
(000s) (000s)
=============================================================
<S> <C> <C>
Loans $134,459* $155,558
Investment Agreements:
-------------------------------------------------------------
Revenue Fund 16,796 17,647
Liquidity Fund 3,768 4,304
-------------------------------------------------------------
$155,023 $177,509
=============================================================
Bonds $134,169 $148,877
=============================================================
</TABLE>
*Net of Allowance for Loan Losses of $1,132,376.
21
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 1999
(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 (86.7%)
-------------- A --------------
$425 Alabama Agricultural and Mechanical University 3.000-3.750 07/01/2005 10.25 $335
1,875 Alabama Agricultural and Mechanical University 3.000 05/01/2018 10.27 1,101
137 Albion College 3.000 10/01/2009 10.56 95
523 Albright College 3.000 11/01/2015 10.23 323
20 Alcorn State University 3.500 11/01/2002 10.15 18
50 Allegheny College 3.000 07/01/2015 10.38 22
190 Alma College 3.750 04/01/2002 11.52 171
47 American International College 3.375 10/01/2002 10.84 41
92 Anderson University 3.500 03/01/2003 11.42 79
230 Anderson University 3.000 03/01/2006 11.19 177
35 Appalachian State University 3.500 07/01/2001 10.28 31
215 Arizona State University 3.125 09/01/2001 10.17 193
190 Arizona State University 3.375 10/01/2002 10.16 166
1,090 Arizona State University 3.000 04/01/2006 10.60 858
82 Arkansas State University 3.375 10/01/2000 10.25 80
583 Arkansas State University 3.750 04/01/2005 10.75 480
2,175 Auburn University 3.000 12/01/2018 9.16 1,324
211 Azusa Pacific University 3.750 04/01/2015 10.88 134
-------------- B --------------
1,065 Baptist College at Charleston 3.000 03/01/2019 10.73 585
669 Baptist College at Charleston 3.000 03/01/2011 10.98 447
187 Becker Junior College 3.000 04/01/2005 11.21 149
93 Bellarmine College 3.625 05/01/2004 11.34 79
107 Benedict College 3.750 11/01/2004 10.75 88
787 Benedict College 3.000 11/01/2006 10.61 604
1,793 Benedict College 3.000 11/01/2020 10.36 970
1,568 Bentley College 3.000 11/01/2007 10.57 1,157
291 Bethany College 3.375 11/01/2012 10.54 194
275 Bethany College 3.000 11/01/2017 10.40 157
520 Bethany College 3.000 11/01/2012 10.40 342
12 Bethune-Cookman College 3.000 11/01/2002 10.74 10
148 Boston Architectural Center 3.750 11/01/2004 10.77 124
90 Bradford College 3.375 10/01/2001 10.85 68
282 Brandeis University 3.000 11/01/2011 10.64 188
110 Brevard College 3.000 11/01/2004 10.71 91
70 Brevard College 3.000 05/01/2006 11.12 54
102 Bryan College 3.500 04/01/2003 11.39 88
2 Buena Vista College 3.500 02/01/2000 11.85 2
108 Buena Vista College 3.000 02/01/2006 11.23 83
</TABLE>
The accompanying notes are an integral part of these financial statements
22
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 1999
(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>
-------------- C --------------
$925 California Polytechnic State University 3.000 11/01/2006 10.05 $697
305 California State University 3.000 11/01/2006 8.75 247
1,200 California State University 3.000 11/01/2013 8.93 824
2,578 California State University 3.000 11/01/2019 8.99 1,568
50 Calvin College 3.000 11/01/2000 10.83 46
2,200 Cameron University 3.000 04/01/2007 10.16 1,693
150 Canisius College 3.375 05/01/2002 11.48 137
1,545 Canisius College 3.000 11/01/2017 10.40 886
130 Carnegie-Mellon University 3.500 11/01/2001 10.52 117
270 Carnegie-Mellon University 3.000 05/01/2009 10.73 193
1,000 Carnegie-Mellon University 3.000 11/01/2017 10.51 580
57 Carroll College 3.125 06/01/2000 10.75 52
344 Carroll College 3.750 06/01/2014 10.46 220
165 Carroll College 3.000 06/01/2018 10.15 95
432 Carroll College 3.750 03/01/2015 10.93 272
205 Case Western Reserve University 3.500 04/01/2003 11.39 176
239 Catawba College 3.000 12/01/2009 10.27 165
40 Central Missouri State University 3.125 07/01/2000 10.24 37
126 Central Missouri State University 3.375 07/01/2001 10.27 113
489 Central Missouri State University 3.625 07/01/2004 10.29 403
895 Central Missouri State University 3.000 07/01/2007 10.18 664
153 Champlain College 3.000 12/01/2013 10.19 96
555 Chapman College 3.000 10/01/2013 10.65 348
303 Chapman College 3.000 11/01/2005 10.63 237
212 Chapman College 3.000 11/01/2007 10.57 157
1,515 Chateau Community Housing Association 3.000 10/01/2012 10.51 973
60 Cisco Junior College 3.000 11/01/2005 10.04 48
110 Cisco Junior College 3.000 07/01/2005 10.15 86
16 Claflin College 3.125 04/01/2001 11.59 15
340 Clemson University 3.000 07/01/2005 9.51 276
146 Coker College 3.000 12/01/2009 10.04 103
66 College of Notre Dame of Maryland 3.375 11/01/2002 10.48 58
126 College of Our Lady of the Elms 3.375 10/01/2001 10.86 113
909 College of Saint Rose 3.000 05/01/2022 10.43 480
511 College of Saint Thomas 3.000 11/01/2009 10.53 357
35 College of Santa Fe 3.500 10/01/2001 10.86 31
189 College of Santa Fe 3.000 10/01/2005 10.66 148
591 College of Santa Fe 3.000 10/01/2018 10.43 334
1,000 College of the Holy Cross 3.625 10/01/2013 10.60 660
715 College of the Holy Cross 3.000 10/01/2006 10.63 542
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 59
</TABLE>
The accompanying notes are an integral part of these financial statements
23
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 1999
(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 Columbia College 3.625 07/01/2004 10.90 $167
70 Columbia College 3.000 07/01/2006 10.80 53
137 Concordia College 3.000 04/01/2009 11.05 99
730 Concordia College 3.000 05/01/2019 10.65 405
56 Cornell College 3.000 10/01/2005 10.66 44
318 Cumberland University 3.000 08/01/2017 10.52 181
-------------- D --------------
28 Daemen College 3.125 04/01/2000 11.68 27
625 Daemen College 3.000 04/01/2016 10.77 370
183 Dakota Wesleyan University 3.000 10/01/2015 10.46 109
250 Dana College 3.000 04/01/2005 11.22 199
53 Dana College 3.500 04/01/2003 11.39 46
134 Dickinson College 3.000 05/01/2018 10.30 78
246 Dillard University 3.000 04/01/2008 11.09 183
38 Doane College 3.000 11/01/2000 10.83 35
200 Dormitory Authority State of NY (New York University) 3.000 07/01/2000 8.95 187
599 Dowling College 3.000 10/01/2010 10.75 408
52 Drexel University 2.875 05/01/2001 11.57 49
1,220 Drexel University 3.500 05/01/2014 10.53 795
281 Drury College 3.000 04/01/2015 10.63 173
483 Drury College 3.000 10/01/2010 10.75 329
1,085 D'Youville College 3.000 04/01/2018 10.90 607
-------------- E --------------
1,216 East Texas State University 3.500 03/01/2002 9.48 1,057
1,549 East Texas State University 3.000 03/01/2002 9.60 1,326
42 East Texas State University 3.000 11/01/2000 9.26 39
390 Elizabeth City State University 3.000 10/01/2017 10.02 234
450 Embry-Riddle Aeronautical University 3.000 09/01/2007 10.64 329
158 Emmanuel College 3.000 11/01/2013 10.45 99
-------------- F --------------
1,640 Fairleigh Dickinson University 3.000 11/01/2017 10.39 942
180 Florida Agricultural and Mechanical University 3.625 07/01/2004 10.29 148
183 Florida Atlantic University 3.500 07/01/2004 10.27 152
315 Florida Atlantic University 3.000 07/01/2006 10.18 240
182 Florida Institute of Technology 3.000 11/01/2009 10.53 127
128 Florida State University 3.500 06/01/2001 8.44 117
710 Florida State University 3.000 01/01/2009 9.40 539
26 Fort Hays State University 3.500 10/01/2001 10.19 24
83 Fort Hays State University 3.625 10/01/2002 10.18 73
155 Fort Hays State University 3.000 10/01/2007 10.08 116
510 Fort Lewis College 3.000 10/01/2006 10.09 394
</TABLE>
The accompanying notes are an integral part of these financial statements
24
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 1999
(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>
-------------- G --------------
$695 Gannon University 3.000 11/01/2011 10.49 $460
205 Gannon University 3.000 12/01/2022 10.13 108
77 Gavilan College 3.000 04/01/2006 10.59 60
49 George Fox College 3.500 04/01/2001 11.25 45
779 George Fox College 3.000 07/01/2018 10.64 438
28 Georgetown College 3.000 12/01/1999 10.02 27
503 Georgetown College 3.000 12/01/2008 10.04 365
890 Georgetown College 3.000 12/01/2009 10.05 629
2,809 Georgetown University 3.000 11/01/2020 10.36 1,520
7,165 Georgetown University 4.000 11/01/2020 10.52 4,226
1,077 Georgetown University 3.000 05/01/2005 10.86 867
556 Georgia Education Authority Board of Regents
of the University System of Georgia 3.375 01/01/2003 10.60 484
85 Grambling State University 3.000 11/01/2000 10.11 82
-------------- H --------------
384 Hampshire College 3.000 07/01/2013 10.75 240
1,381 Hampshire College 3.000 02/01/2014 10.70 854
150 Harcum Junior College 3.375 11/01/2002 10.77 130
660 Harper Grace Hospital 3.625 04/01/2005 11.26 534
147 Hesston College 3.000 04/01/2006 11.14 113
318 High Point College 3.000 12/01/2010 10.26 214
1,959 Hinds Junior College 3.000 04/01/2013 10.42 1,294
81 Hiwassee College 3.375 01/01/2003 11.58 71
199 Hiwassee College 3.000 09/15/2018 10.58 112
1,986 Hofstra University 3.000 11/01/2012 10.61 1,291
285 Hood College 3.625 11/01/2014 10.54 184
405 Houston Tillotson College 3.500 04/01/2014 10.90 262
45 Huntingdon College 3.500 03/01/2002 11.54 40
245 Huntingdon College 3.000 10/01/2008 10.60 175
-------------- I --------------
156 Illinois Institute of Technology 3.000 03/01/2003 11.10 133
262 Indiana University 3.375 04/01/2001 10.06 245
600 Indiana University 3.500 04/01/2001 10.06 561
1,208 Indiana University 3.750 12/01/2003 8.84 1,068
113 Inter American University of Puerto Rico 3.000 09/01/2007 10.66 84
2,458 Inter American University of Puerto Rico 3.000 01/01/2017 10.94 1,406
-------------- J --------------
1,640 James Madison University 3.000 06/01/2009 10.49 1,134
14 John Brown University 2.875 04/01/2000 11.64 13
389 Johnson & Wales College 3.000 11/01/2013 10.59 247
205 Johnson C. Smith University 3.000 05/01/2005 11.18 164
25 Judson College 3.750 07/01/2004 10.92 20
</TABLE>
The accompanying notes are an integral part of these financial statements
25
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 1999
(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>
-------------- K --------------
$141 Kansas State University 3.375 10/01/2002 9.12 $127
775 Kansas State University 3.625 04/01/2004 9.77 668
70 Kendall College 3.375 10/01/2002 10.82 61
224 Kendall College 3.000 10/01/2008 10.59 160
276 Kent State University 3.500 12/01/2000 8.90 259
330 Knox College 3.000 04/01/2006 11.15 255
-------------- L --------------
310 LaGrange College 3.000 03/01/2009 11.06 217
259 Langston University 3.375 10/01/2003 10.15 221
995 Langston University 3.000 04/01/2007 10.56 756
469 Lassen Junior College District 3.000 04/01/2020 10.27 263
1,150 Leland Stanford Junior College 3.375 05/01/2003 11.33 989
184 Lenoir Rhyne College 3.000 12/01/2006 10.04 142
82 Linfield College 3.000 10/01/2017 10.44 47
699 Long Island University 3.750 05/01/2005 11.22 569
209 Long Island University 3.000 11/01/2009 10.69 147
731 Long Island University 3.000 11/01/2009 10.69 514
339 Long Island University 3.750 04/01/2003 11.41 293
545 Long Island University 3.625 06/01/2014 10.49 346
96 Long Island University 3.750 10/01/2004 10.79 79
193 Louisiana State University 3.500 07/01/2001 8.65 178
826 Louisiana State University 3.625 07/01/2004 9.04 703
338 Louisiana State University 3.000 07/01/2005 8.84 280
305 Louisiana State University 3.000 07/01/2006 8.87 248
173 Louisiana State University 3.000 07/01/2001 8.62 158
112 Lycoming College 3.500 05/01/2001 11.22 104
242 Lycoming College 3.625 05/01/2014 10.64 158
325 Lycoming College 3.750 05/01/2015 10.62 209
503 Lynchburg College 3.750 05/01/2015 10.64 328
650 Lynchburg College 3.000 05/01/2018 10.68 371
-------------- M --------------
380 MacAlester College 3.375 05/01/2002 11.41 338
445 MacAlester College 3.000 05/01/2020 10.46 246
10 Madison General Hospital 3.000 12/01/1999 9.67 10
535 Marian College 3.000 10/01/2016 10.45 313
93 Marquette University 3.000 07/31/2024 10.59 46
418 Mary Baldwin College 3.375 05/01/2012 10.68 283
630 Marymount University 3.000 05/01/2016 10.52 378
770 McLennan Community College 3.000 04/01/2006 10.49 608
46 McNeese State University 3.500 10/01/2001 10.18 42
1,009 Memorial Hospital for Cancer and Allied Diseases 3.375 04/01/2012 10.68 683
</TABLE>
The accompanying notes are an integral part of these financial statements
26
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 1999
(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>
$58 Menlo College 3.125 04/01/2001 11.53 $53
487 Mercer University 3.000 05/01/2014 10.58 310
1,440 Mercy College of Detroit 3.625 10/01/2013 10.59 937
37 Merrimack College 3.000 04/15/2019 10.53 27
120 Merrimack College 3.000 04/15/2008 10.79 67
59 Middlebury College 3.375 10/01/2002 11.12 52
91 Midland Lutheran College 3.000 04/01/2005 11.20 73
576 Millsaps College 3.000 11/01/2021 10.34 306
26 Mississippi State University 2.875 01/01/2000 10.99 25
1,575 Mississippi State University 3.000 12/01/2020 9.64 897
54 Mississippi Valley State University 3.500 07/01/2001 10.28 48
72 Molloy College 3.375 10/01/2002 10.81 62
220 Moravian College 3.375 11/01/2012 10.52 145
745 Morehouse College 3.000 07/01/2010 10.50 476
2,228 Morgan State University 3.000 11/01/2014 10.56 1,378
196 Morris Brown College 3.750 05/01/2007 11.12 151
1,868 Morris Brown College 2.750-3.750 05/01/2018 10.89 1,168
580 Morris College 3.000 11/01/2009 10.53 405
34 Muhlenberg College 3.000 11/01/2000 10.50 32
-------------- N --------------
157 New England College 3.000 04/01/2016 10.77 92
660 Newark Beth Israel Hospital 3.625 01/01/2014 11.06 418
68 NIACC Dormitories, Inc. 3.000 10/01/2012 10.27 45
2,838 Norfolk State University 3.000 12/01/2021 9.77 1,561
North Carolina Agricultural and
632 Technical State University 3.000 05/01/2014 10.34 401
485 North Carolina State University 3.625 09/01/2004 7.97 426
147 North Carolina State University 3.125 09/01/2001 7.58 137
181 North Carolina State University 3.500 09/01/2001 7.63 169
110 North Greenville College 3.000 11/01/2003 10.72 94
126 Northeast Louisiana University 3.500 04/01/2001 10.28 118
288 Northeast Missouri State University 3.375-3.500 05/01/2002 10.75 260
3,027 Northeastern University 3.000 05/01/2018 10.53 1,727
111 Northeastern University 3.000 05/01/2004 10.97 92
50 Northwestern State University 3.125 10/01/2000 10.15 47
385 Nova University 3.000 12/01/2007 10.04 288
-------------- O -------------
274 Occidental College 3.000 10/01/2019 10.41 150
205 Olympic Community College 3.000 10/01/2008 10.07 149
28 Ouachita Baptist University 3.125 12/01/1999 10.03 27
31 Ouachita Baptist University 3.000 12/01/2006 10.04 24
</TABLE>
The accompanying notes are an integral part of these financial statements
27
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 1999
(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>
-------------- P -------------
$920 Paine College 3.000 10/01/2016 10.45 $538
2,406 Philadelphia College of Art 3.000 01/01/2022 10.62 1,246
490 Pine Manor College 3.625 10/01/2003 10.80 413
163 Polytechnic University 3.375 10/01/2011 10.59 110
193 Post College 3.000 04/01/2010 10.76 133
960 Purdue University 3.625 07/01/2004 9.33 808
283 Purdue University 3.000 07/01/2005 9.26 232
-------------- Q -------------
19 Queens College 3.500 11/01/2001 10.88 18
131 Queens College 3.625 07/01/2004 10.90 106
-------------- R -------------
292 Randolph-Macon College 3.000 05/01/2010 10.72 203
98 Randolph-Macon College 3.000 11/01/2000 10.50 91
510 Regis College (Denver) 3.000 11/01/2012 10.47 328
88 Regis College (Weston) 3.375 10/01/2002 10.85 77
200 Rhode Island College 3.000 10/01/2005 10.09 159
60 Rider College 3.500 05/01/2001 11.57 56
183 Rider College 3.375 05/01/2002 11.44 164
27 Rider College 3.125 11/01/2000 10.86 25
1,805 Rider College 3.625 11/01/2013 10.42 1,192
442 Rider College 3.000 05/01/2017 10.70 257
97 Rio Grande College 3.000 03/30/2009 10.93 69
675 Rutgers, The State University 3.750 05/01/2016 9.19 463
190 Rutgers, The State University 3.125 05/01/2001 8.89 180
-------------- S -------------
75 Saint Ambrose University 3.000 11/01/2001 10.78 67
65 Saint Anselm College 3.375 10/01/2001 10.88 59
7 Saint Edward's University 3.125 04/01/2000 11.69 7
72 Saint John's University 3.000 10/01/2002 10.76 62
90 Saint Joseph Hospital 3.500 10/01/2001 10.87 81
148 Saint Louis College of Pharmacy 3.375 10/01/2004 10.74 120
23 Saint Louis University 3.125 10/01/2000 10.90 21
294 Saint Louis University 3.500 11/01/2002 10.80 257
99 Saint Mary's College 3.000 03/01/2005 11.25 79
424 Saint Mary's College 3.000 06/01/2020 10.14 236
1,916 Saint Michael's College 3.000 05/01/2013 10.60 1,230
181 Saint Norbert College 3.375 04/01/2002 11.52 165
194 Saint Norbert College 3.625 04/01/2004 11.33 162
367 Saint Norbert College 3.000 04/01/2007 11.10 275
487 Saint Paul's College 3.000 11/01/2014 10.56 301
635 Saint Vincent College 3.500 05/01/2013 10.86 415
</TABLE>
The accompanying notes are an integral part of these financial statements
28
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 1999
(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>
$180 Sam Houston State University 3.500 10/01/2001 9.10 $165
815 San Diego State University 3.000 11/01/2007 10.04 632
1,220 Sangamon State University 3.000 11/01/2018 10.12 724
190 Seattle University 3.500 11/01/2001 10.84 172
480 Seattle University 3.000 11/01/2008 10.55 344
110 Seton Hall University 3.000 11/01/2000 10.83 102
328 Seton Hill College 3.625 11/01/2014 10.53 210
17 Sierra College 3.375 04/01/2002 10.87 16
314 Simpson College 3.000 07/01/2016 10.58 181
396 South Dakota School of Mines and Technology 3.000 04/01/2018 10.30 229
207 South Dakota School of Mines and Technology 3.625 04/01/2002 10.85 188
24 South Plains College 3.500 10/01/2002 10.18 21
72 South Plains College 3.625 10/01/2004 10.17 60
50 South Plains College 3.000 10/01/2005 10.10 40
330 Southeast Missouri State University 3.500 04/01/2002 10.82 296
1,111 Southeast Missouri State University 3.000 04/01/2007 10.58 858
730 Southeastern Oklahoma State University 3.000 04/01/2009 10.51 527
106 Southern Arkansas University 3.500 10/01/2002 10.23 93
505 Southern Methodist University 3.000 10/01/2007 10.61 371
224 Southern Nazarene University 3.750 04/01/2005 11.27 182
455 Southwest Missouri State College 3.375 10/01/2002 10.17 404
2,305 Southwest Texas State University 3.000 10/01/2015 9.51 1,460
7 Southwestern Christian College 3.000 11/01/2000 10.83 6
4 Spalding University 3.125 09/01/2000 10.95 4
331 Spalding University 3.000 09/01/2007 10.66 248
6 Springfield College 3.125 05/01/2000 11.29 5
473 Springfield College 3.500 05/01/2013 10.67 319
75 Springfield College 3.000 05/15/2005 10.11 60
155 State Center Community College 3.000 10/01/2004 10.10 127
1,897 Stephen F. Austin State University 3.375-3.500 10/01/2012 9.57 1,317
183 Stetson University 3.000 01/01/2006 11.25 140
130 Stillman College 3.750 02/01/2004 11.42 108
313 Stonehill College 3.000 10/01/2006 10.64 238
175 SUNY, Mohawk Valley Community College 3.000 04/01/2005 10.26 126
35 Susquehanna University 3.125 05/01/2000 11.27 34
648 Syracuse University 3.000 05/01/2008 10.74 476
-------------- T -------------
44 Talladega College 3.375 12/01/2001 10.08 40
413 Talladega College 3.000 12/01/2012 10.24 269
267 Taylor University 3.000 10/01/2012 10.50 171
816 Taylor University 3.000 10/01/2013 10.49 514
646 Texas A & I University 3.000 07/01/2009 9.57 467
</TABLE>
The accompanying notes are an integral part of these financial statements
29
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 1999
(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>
$91 Texas Southern University 3.500 04/01/2001 10.89 $85
500 Texas Southern University 3.500 04/01/2013 10.45 334
448 Transylvania University 3.000 11/01/2010 10.51 304
690 Trinity University 3.625 09/01/2004 10.82 562
192 Tufts University 3.375 10/01/2001 10.87 173
2,300 Tufts University 3.000 10/01/2021 10.39 1,215
390 Tulane University of Louisiana 3.500 10/01/2001 9.06 358
-------------- U -------------
33 Union College 3.000 11/01/2002 10.74 29
1,780 University of Alabama in Birmingham 3.000 11/01/2008 7.97 1,421
39 University of Alaska 3.500 04/01/2000 10.94 38
133 University of Alaska 3.375 04/01/2002 10.82 119
336 University of Alaska 3.500 04/01/2003 10.80 301
83 University of Arkansas at Little Rock 3.500 04/01/2001 10.04 78
185 University of Arkansas at Little Rock 3.000 11/01/2009 9.42 139
443 University of Central Arkansas 3.000 04/01/2005 10.69 358
485 University of Central Florida 3.000 10/01/2007 10.08 364
220 University of Chicago 3.500 12/01/2001 10.10 197
71 University of Chicago 3.375 12/01/2001 10.08 63
29 University of Chicago 3.500 12/01/2002 10.11 25
50 University of Delaware 3.125 11/01/2000 8.84 47
23 University of Delaware 3.375 11/01/2000 8.81 22
1,100 University of Delaware 3.000 11/01/2006 9.08 880
684 University of Delaware 3.000 12/01/2018 8.81 429
2,225 University of Florida 3.000 07/01/2014 10.15 1,382
89 University of Hartford 3.000 11/01/2001 10.78 79
40 University of Hawaii at Manoa 3.500 10/01/2001 10.18 36
24 University of Lowell 3.000 11/01/2000 7.62 23
2,100 University of Michigan 3.750 10/01/2005 9.51 1,741
568 University of Missouri 3.375 05/01/2002 10.03 530
39 University of Missouri 2.875 11/01/2000 9.25 37
35 University of Montevallo 3.125 11/01/2000 9.27 33
91 University of Nevada at Reno 3.000 11/01/1999 10.12 91
667 University of North Carolina 3.000 11/01/2005 8.81 557
580 University of North Carolina 3.000 01/01/2008 9.50 442
49 University of North Carolina 3.000 01/01/2007 9.50 39
1,007 University of Notre Dame 3.000 02/15/2019 10.62 560
795 University of Portland 3.375 04/01/2013 10.88 524
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 1,183
28 University of Rhode Island 3.000 10/01/2001 9.68 26
647 University of Saint Thomas 3.000 10/01/2019 10.41 355
</TABLE>
The accompanying notes are an integral part of these financial statements
30
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 1999
(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>
$320 University of Santa Clara 3.125 04/01/2002 11.44 $283
145 University of Santa Clara 3.375 04/01/2002 11.45 129
850 University of Santa Clara 3.625 04/01/2004 11.33 709
17 University of Scranton 3.125 11/01/2000 10.84 16
107 University of South Dakota 3.500 10/01/2001 9.59 98
790 University of South Florida 3.750 07/01/2005 10.30 634
332 University of Steubenville 3.125 04/01/2010 10.98 229
1,261 University of Vermont 3.000 07/01/2016 8.95 812
100 University of Vermont 3.375 07/01/2001 8.33 93
1,175 University of Vermont 3.000 07/01/2019 9.06 707
200 University of Washington 3.500 08/01/2002 9.07 178
253 University of Washington 3.000 08/01/2003 9.06 217
1,570 University Student Co-Operative Association 3.000 04/01/2019 10.70 868
49 Ursinus College 3.000 10/01/2000 10.86 45
487 Utica College 3.000 11/01/2009 10.53 340
-------------- V -------------
445 Vermont State College 3.000 06/01/2008 9.02 337
253 Vermont State College 3.000 07/01/2014 9.30 165
1,170 Villanova University 3.000 04/01/2019 10.70 647
3,770 Vincennes University 3.000 06/01/2023 9.02 2,121
2,507 Virginia Commonwealth University 3.000 06/01/2011 10.01 1,681
890 Virginia Commonwealth University 3.000 06/01/2004 10.08 723
321 Virginia Wesleyan College 3.000 11/01/2009 10.54 228
190 Virginia Wesleyan College 3.000 11/01/2010 10.51 129
-------------- W -------------
10 Waldorf College 3.125 07/01/2000 10.97 9
209 Waldorf College 3.000 07/01/2005 10.77 162
29 Wartburg College 3.500 10/01/2001 10.87 26
157 Wartburg College 3.750 04/01/2011 11.00 109
650 Washington State University 3.625 04/01/2004 10.02 558
420 Washington State University 3.750 04/01/2004 10.03 362
680 Washington State University 3.375 04/01/2003 10.02 598
147 Washington University 3.500 10/01/2001 10.91 135
224 Wesley College 3.375 05/01/2013 10.88 149
61 West Kern Junior College District 3.625 04/01/2004 10.73 52
470 West Valley College 3.000 04/01/2009 10.50 339
43 West Virginia Wesleyan College 2.875 05/01/2000 11.56 41
457 West Virginia Wesleyan College 3.000 05/01/2015 10.75 279
334 Western Carolina University 3.625 05/01/2003 10.75 295
135 Western Washington University 3.500 10/01/2001 10.18 122
520 Western Washington University 3.625 10/01/2004 10.18 432
390 Western Washington University 3.750 10/01/2005 10.19 317
</TABLE>
The accompanying notes are an integral part of these financial statements
31
<PAGE>
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 1999
(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>
$27 Westmoreland Hospital Association 3.500 07/01/2001 10.98 $24
830 Wheaton College 3.500 04/01/2013 10.70 546
180 Wheeling College 3.500 05/01/2001 11.23 167
76 Wheeling College 3.000 11/01/2007 10.59 56
26 Wheelock College 3.000 05/01/2011 10.23 18
17 Wichita State University 3.000 10/01/2000 9.29 16
775 Wittenberg University 3.000 05/01/2015 10.76 470
235 Wittenberg University 3.000 11/01/2017 10.39 135
46 Wooster Business College 3.000 03/30/2009 10.88 33
79 Worcester Polytechnic Institute 3.375 04/01/2001 11.57 73
639 Wright State University 3.000 05/01/2009 9.89 479
-------------- Y -------------
361 York Hospital 3.000 05/01/2020 10.64 198
--------------
- ---------
197,269 Total College and University Loans 135,591
- ---------
Allowance for Loan Losses 1,132
--------------
Net Loans of the Trust 134,459
--------------
INVESTMENT AGREEMENTS (13.3%)
-----------------------------
Morgan Guaranty Trust Company -
3,768 Liquidity Fund 7.750 06/01/2018 7.750 3,768
Morgan Guaranty Trust Company -
16,796 Revenue Fund 7.050 06/01/2018 7.050 16,796
--------------
- ---------
20,564 Total Investment Agreements 20,564
- --------- --------------
- --------- --------------
$217,833 Total Investments (100.0%) $155,023
========= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
32
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains information extracted from the November 30, 1999 College
and University Facility Loan Trust Two financial statement and is qualified in
its entirety by reference to such financial statement.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> NOV-30-1999
<INVESTMENTS-AT-COST> 155023
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 1461
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 649
<TOTAL-ASSETS> 157133
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 134169
<OTHER-ITEMS-LIABILITIES> 5239
<TOTAL-LIABILITIES> 139408
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20858
<SHARES-COMMON-STOCK> 1763800
<SHARES-COMMON-PRIOR> 1763800
<ACCUMULATED-NII-CURRENT> (4897)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 17725
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15918
<OTHER-INCOME> 0
<EXPENSES-NET> 13488
<NET-INVESTMENT-INCOME> 2430
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2430
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 1382
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1535)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 15079
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 13046
<GROSS-EXPENSE> 13488
<AVERAGE-NET-ASSETS> 18377
<PER-SHARE-NAV-BEGIN> 9.45
<PER-SHARE-NII> 1.38
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.67)
<RETURNS-OF-CAPITAL> (.11)
<PER-SHARE-NAV-END> 10.05
<EXPENSE-RATIO> .73
[AVG-DEBT-OUTSTANDING] 142273
[AVG-DEBT-PER-SHARE] 80.66
</TABLE>
