UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-05506
College and University Facility Loan Trust Two
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(Exact name of registrant as specified in charter)
c/o U.S. Bank One Federal Street Boston, MA 02110
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(Address of principal executive offices) (Zip code)
Diana J. Kenneally
U.S. Bank Corporate Trust Services
One Federal Street
Boston, MA 02110
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(Name and address of agent for service)
Registrant's telephone number, including area code: (617) 603-6406
Date of fiscal year end: November 30, 2003
Date of reporting period: November 30, 2003
ITEM 1. REPORT TO STOCKHOLDERS.
College and University
Facility Loan Trust Two
================================================================================
Financial Statements
November 30, 2003
INDEPENDENT AUDITORS' REPORT
To U.S. Bank, Owner Trustee
of College and University Facility Loan Trust Two:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of College and University Facility Loan Trust Two
(the Trust) as of November 30, 2003, and the related statements of operations
and cash flows for the year then ended, and the statement of changes in net
assets and the financial highlights for each of the two years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial statements of the Trust as of November 30, 2001 and the
financial highlights for each of the three years in the period then ended, were
audited by other auditors who have ceased operations and whose report, dated
January 4, 2002, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of November 30, 2003, by correspondence with the custodian.
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.
As described in Note 2 to the financial statements, the Trust is accounting for
its investments under the amortized cost method of accounting, adjusted by an
allowance for loan loss. In our opinion, accounting principles generally
accepted in the United States of America require that the investments be
accounted for under the fair value method of accounting. Accounting for the
investments under the fair value method of accounting, based on management's
estimate of fair value as described in Note 8, would result in an increase of
approximately $27,486,000 and $33,572,000 in the recorded value of the
investments and an increase in unrealized appreciation of investments of
approximately $27,486,000 and $33,572,000 as of November 30, 2003 and November
30, 2002, respectively.
In our opinion, except for the effect on the 2003 and 2002 financial statements
of accounting for investments under the amortized cost method of accounting as
discussed in the preceding paragraph, such financial statements and financial
highlights present fairly, in all material respects, the financial position of
the Trust as of November 30, 2003, the results of its operations and its cash
flows for the year then ended, and the changes in its net assets and the
financial highlights for each of the two years in the period then ended, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
January 29, 2004
College and University
Facility Loan Trust Two
Statement of Assets and Liabilities
================================================================================
November 30, 2003
================================================================================
Assets:
Investments, at amortized cost, net of allowance for loan
losses of $1,432,376 (Notes 1, 2, 6, 7 and 8, and Schedule
of Investments) $94,155,386
Cash 50,000
Interest receivable 885,710
Deferred bond issuance costs (Note 2) 298,096
- --------------------------------------------------------------------------------
Total assets 95,389,192
- --------------------------------------------------------------------------------
Liabilities:
Bonds payable, net of unamortized discount (Notes 3 and 8) 78,762,077
Interest payable (Note 3) 1,975,195
Accrued expenses and other liabilities 261,501
Distribution payable to Class B certificateholders (Note 5) 2,278,353
- --------------------------------------------------------------------------------
Total liabilities 83,277,126
- --------------------------------------------------------------------------------
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) (2,794,497)
Additional paid-in capital (Note 2) 13,142,763
- --------------------------------------------------------------------------------
Total net assets $12,112,066
================================================================================
Net asset value per Class B certificate
(based on 1,763,800 certificates outstanding) $ 6.87
================================================================================
The accompanying notes are an integral part of these financial statements.
3
College and University
Facility Loan Trust Two
Statement of Operations
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Year ended November 30, 2003
================================================================================
Investment income:
Interest income (Note 2) $10,381,106
- --------------------------------------------------------------------------------
Expenses:
Interest expense (Notes 2 and 3) 8,126,112
Servicer fees (Note 4) 116,690
Trustee fees (Note 4) 50,589
Other trust and bond administration expenses 249,403
- --------------------------------------------------------------------------------
Total expenses 8,542,794
- --------------------------------------------------------------------------------
Net investment income 1,838,312
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 1,838,312
================================================================================
The accompanying notes are an integral part of these financial statements.
4
College and University
Facility Loan Trust Two
Statement of Cash Flows
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Year ended November 30, 2003
================================================================================
Cash flows from operating activities:
Interest received $ 4,564,651
Interest paid (4,408,323)
Operating expenses paid (407,675)
- --------------------------------------------------------------------------------
Net cash used in operating activities (251,347)
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Net increase in funds held under investment agreements 2,758,729
Principal payments on Loans 17,692,983
- --------------------------------------------------------------------------------
Net cash provided by investing activities 20,451,712
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Principal repayments on Bonds (16,602,246)
Distributions to Class B certificateholders (3,935,967)
- --------------------------------------------------------------------------------
Net cash used in financing activities (20,538,213)
- --------------------------------------------------------------------------------
Net decrease in cash (337,848)
Cash, beginning of year 387,848
- --------------------------------------------------------------------------------
Cash, end of year $ 50,000
================================================================================
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 $ 1,838,312
Decrease in interest receivable 125,094
Increase in accrued expenses and other liabilities 9,007
Decrease in Bond interest payable (332,045)
Amortization of original issue discount on Bonds 3,987,275
Amortization of purchase discount on Loans (5,941,549)
Amortization of deferred Bond issuance costs 62,559
- --------------------------------------------------------------------------------
Net cash used in operating activities $ (251,347)
================================================================================
The accompanying notes are an integral part of these financial statements.
5
College and University
Facility Loan Trust Two
Statement of Changes in Net Assets
(Note 2(f))
================================================================================
Years ended November 30, 2003 2002
================================================================================
From operations:
Net investment income $ 1,838,312 $ 2,419,380
- --------------------------------------------------------------------------------
Net increase in net assets applicable to
Class B certificateholders resulting from
operations 1,838,312 2,419,380
Capital certificate transactions:
Distributions to Class B certificateholders
(Note 5) (3,204,355) (3,980,969)
- --------------------------------------------------------------------------------
Net decrease in net assets (1,366,043) (1,561,589)
Net assets:
Beginning of year 13,478,109 15,039,698
- --------------------------------------------------------------------------------
End of year $12,112,066 $13,478,109
================================================================================
The accompanying notes are an integral part of these financial statements.
6
College and University
Facility Loan Trust Two
Financial Highlights
(Notes 1 and 5)
====================================================================================================================================
Years ended November 30, 2003 2002 2001 2000 1999
====================================================================================================================================
Net asset value, beginning of year $ 7.64 $ 8.53 $ 9.01 $ 10.05 $ 9.45
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.04 1.37 1.15 1.34 1.38
Provision for loan losses - - - (.17) -
Dividends to Class A Preferred
certificateholders:
As tax return of capital - - - - (.11)
Distribution to Class B
certificateholders:
As tax return of capital (1.81) (2.26) (1.63) (2.21) (.67)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 6.87 $ 7.64 $ 8.53 $ 9.01 $ 10.05
====================================================================================================================================
Total investment return(a) N/A N/A N/A N/A N/A
Net assets applicable to Class B
certificates, end of year $12,112,066 $13,478,109 $15,039,698 $15,898,314 $17,724,801
====================================================================================================================================
Ratios and Supplemental Data:
Ratio of operating expenses to average
net assets applicable to
Class B certificates 66.77%(b) 70.03%(b) 69.21%(b) 73.02%(b) 78.42%(b)
Ratio of net investment income
to average net assets applicable
to Class B certificates 14.37% 16.97% 13.05% 14.10% 14.13%
Number of Class B certificates
outstanding, end of year 1,763,800 1,763,800 1,763,800 1,763,800 1,763,800
(a) The Trust's investments are recorded at amortized cost as discussed in Note 2. Accordingly, the financial statements do not
reflect the market value of such investments. For this reason, management believes that no meaningful information can be
provided regarding "Total investment return" and has not included information under that heading. In addition, as the Trust's
investments are not traded, management believes that no meaningful information can be provided regarding portfolio turnover.
(b) Excluding interest expense, the ratio of operating expenses to average net assets applicable to Class B certificates was 3.26%,
2.76%, 2.72%, 2.53% and 2.57% in 2003, 2002, 2001, 2000 and 1999, respectively.
The accompanying notes are an integral part of these financial statements.
7
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
1. Organization College and University Facility Loan Trust Two (the Trust)
and Business was formed on March 11, 1988 as a business trust under the
laws of the Commonwealth of Massachusetts by a declaration
of trust by the Bank of Boston (the Owner Trustee),
succeeded by State Street Bank and Trust Company, succeeded
by US Bank (successor 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 J.P. Morgan Trust Company National Association, as
successor in interest 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
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
1. Organization All payments on the Loans and earnings under the investment
and Business agreements and any required transfers from the Expense and
(Continued) 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 in 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.
On the Closing Date, certificates were issued by the Trust
to ED as partial payments for the Loans. In December 1989,
ED sold, through a private placement, all of its ownership
interest in the Trust.
2. Summary of (a) College and University Facility Loans
Significant
Accounting The Loans were purchased and recorded at a discount below
Policies 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 statement
of assets and liabilities, 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. When a Loan
prepays, the remaining discount is recognized as interest
income. The remaining balance of the purchase discount on
the Loans as of November 30, 2003 was approximately
$33,693,000. As a result of prepayments of Loans in the year
ended November 30, 2003, additional interest income of
approximately $739,000 was recognized.
9
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
2. Summary of (a) College and University Facility Loans (Continued)
Significant
Accounting The Trust's policy is to discontinue the accrual of interest
Policies on Loans for which payment of principal or interest is 180
(Continued) 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 generally recognized when received.
Payments are generally applied to interest first, with the
balance, if any, applied to principal. At November 30, 2003,
no loans have been placed on nonaccrual status.
Accounting principles generally accepted in the United
States of America (GAAP), requires that the Loans be
accounted for under the fair value method of accounting.
However, management believes that the amortized cost method
of accounting best serves the informational needs of the
users of the Trust's financial statements.
(b) Other Investments
Other investments, which are included in investments in the
accompanying statement of assets and liabilities, consist of
two investment agreements issued by JP Morgan Chase Bank,
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 JP Morgan Chase
Bank's option. These investments are carried at amortized
cost. These investment agreements terminate on the earlier
of June 1, 2018 or the date on which the Bonds are
paid-in-full.
GAAP requires that the investments be accounted for under
the fair value method of accounting. However, management
believes that the amortized cost method of accounting best
serves the informational needs of the users of the Trust's
financial statements.
10
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
2. Summary of (c) Federal Income Taxes
Significant
Accounting It is the Trust's policy to comply with the requirements
Policies applicable to a regulated investment company under
(Continued) 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.
(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 allowance for loan losses is based on the Trust's
evaluation of the level of the allowance required to reflect
the risks in the loan portfolio, based on circumstances and
conditions known or anticipated at each reporting date.
The methodology for assessing the appropriateness of the
allowance consists of a review of the following three key
elements:
(1) a valuation allowance for loans identified as
impaired,
(2) a formula-based general allowance for the various
loan portfolio classifications, and
(3) an unallocated allowance.
11
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
2. Summary of (e) Accounting for Impairment of a Loan and Allowance for
Significant Loan Losses (Continued)
Accounting
Policies A loan is impaired when, based on current information and
(Continued) events, it is probable that the Trust will be unable to
collect all amounts due in accordance with the contractual
terms of the loan agreement. Loans identified as impaired
are further evaluated to determine the estimated extent of
impairment.
The formula-based general allowance is derived primarily
from a risk-rating model that grades loans based on general
characteristics of credit quality and relative risk. As
credit quality for individual loans deteriorates, the risk
rating and the allowance allocation percentage increases.
The sum of these allocations comprise the Trust's
formula-based general allowance.
In addition to the valuation and formula-based general
allowance, there is an unallocated allowance. This element
recognizes the estimation risks associated with the
valuation and formula-based models. It is further adjusted
for qualitative factors including, among others, general
economic and business conditions, credit quality trends, and
specific industry conditions.
There are inherent uncertainties with respect to the final
outcome of loans and as such, actual losses may differ from
the amounts reflected in the financial statements.
12
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
2. Summary of (f) Presentation of Capital Distributions
Significant
Accounting Capital distributions are accounted for in accordance with
Policies the American Institute of Certified Public Accountants
(Continued) Statement of Position (SOP) 93-2, "Determination, Disclosure
and Financial Statement Presentation of Income, Capital Gain
and Return of Capital Distributions by Investment
Companies." 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 distributions in excess of tax earnings to
paid-in-capital. The total reclassification was $1,622,266
as of November 30, 2003. This reclassification has no impact
on the net investment income or net assets of the Trust.
The reclassifications are a result of permanent differences
between GAAP and tax accounting for such items as net
operating losses and the accretion of purchase discount on
the Loans. Additionally, the amount deducted for the
allowance for loan losses is not currently deductible for
tax purposes and creates a temporary deficit reflected as
distributions in excess of tax earnings in the accompanying
statement of assets and liabilities.
On December 1, 2002 and June 1, 2003, distributions of $1.71
and $0.53 per certificate were declared and paid to
certificateholders of record on November 20, 2002 and May
20, 2003, respectively.
13
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
2. Summary of (f) Presentation of Capital Distributions (Continued)
Significant
Accounting The tax character of distributions paid during the year
Policies ended November 30, 2003 were as follows:
(Continued)
Distributions paid from:
Ordinary income $ -
Long-term capital gain -
Return of capital 3,935,967
------------------------------------------------------------
Total distributions $ 3,935,967
============================================================
As of November 30, 2003, the components of
distributable earnings on a tax basis were
as follows:
Undistributed ordinary loss $(2,794,497)
Undistributed long-term gain -
Unrealized appreciation -
------------------------------------------------------------
$(2,794,497)
============================================================
The undistributed ordinary loss consists of allowance for
loan losses of $1,432,376 and accretion of purchase discount
on the Loans of $1,362,121 which will reverse in future
years causing a reduction in taxable ordinary income.
14
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
2. Summary of (g) Use of Estimates
Significant
Accounting The preparation of financial statements in conformity with
Policies accounting principles generally accepted in the United
(Continued) States requires us to make estimates, judgments and
assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure
of contingent assets and liabilities at the date of the
financial statements and for the period then ended. On an
on-going basis, we evaluate the estimates used, including
those related to the allowance for loan losses. We base our
estimates on historical experience, actuarial estimates,
current conditions and various other assumptions that we
believe to be reasonable under the circumstances. These
estimates form the basis for making judgments about the
carrying values of assets and liabilities and are not
readily apparent from other sources. We use these estimates
to assist us in the identification and assessment of the
accounting treatment necessary with respect to commitments
and contingencies. Actual results may differ from these
estimates under different assumptions or conditions.
The allowance for loan losses is a critical accounting
policy that requires estimates and assumptions to be made in
the preparation of the Trust's financial statements. The
allowance for loan losses is based on the Trust's evaluation
of the level of the allowance required in relation to the
estimated loss exposure in the loan portfolio. The allowance
for loan losses is a significant estimate and is therefore
regularly evaluated for adequacy by taking into
consideration factors such as prior loan loss experience,
the character and size of the loan portfolio, business and
economic conditions and the Trust's estimation of future
losses. The use of different estimates or assumptions could
produce different provisions for loan losses. See Note 2(e)
for a detailed description of the Trust's estimation process
and methodology related to the allowance for loan losses.
15
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
3. Bonds The Bonds outstanding at November 30, 2003 consist of the
following:
Outstanding Unamortized Carrying
Interest Stated Principal Discount Amount
Type Rate Maturity (000's) (000's) (000's)
================================================================================
Sequential 4.00% June 1, 2018 $98,760 $19,998 $78,762
Interest on the Bonds is payable semiannually. On December
1, 2003, the Trust made a principal payment of $9,081,538 on
the 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.
16
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
3. Bonds The estimated aggregate principal payments on the Bonds at
(Continued) November 30, 2003 after (Continued) taking into
consideration actual Loan prepayments, Defaulted Loans and
the Maximum Principal Distribution Amount, as defined in the
Indenture, are as follows:
Amount
Fiscal Year (000's)
============================================================
2004 $13,607
2005 11,217
2006 9,739
2007 8,591
2008 7,632
Thereafter 47,974
------------------------------------------------------------
Total $98,760
============================================================
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.
17
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
4. Administrative (a) Servicer
Agreements
As compensation for the services provided under the
servicing agreement, GMAC Commercial Mortgage receives a
servicing fee. The fee is earned each date payments are
received on each Loan and is equal to 0.075 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, 2003, this fee totaled
$96,759. GMAC Commercial Mortgage is reimbursed by the Trust
for out-of-pocket expenses incurred in connection with the
inspection of buildings and property used as collateral for
the loans. For the year ended November 30, 2003,
out-of-pocket expenses totalled $19,931.
(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 $15,000 and
$12,500, respectively, for the year ended November 30,
2003. In addition, the Owner Trustee incurred $1,000 of
out-of-pocket expenses.
o The Bond Trustee is entitled to an annual fee equal to
0.015 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. In addition, the Bond Trustee is reimbursed for
other agreed-upon related expenses. For the year ended
November 30, 2003, total Bond Trustee fees and
out-of-pocket expenses amounted to $22,089.
18
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
5. Certificates Holders of each of the Class B certificates receive amounts
paid to the Owner Trustee pursuant to the Declaration of
Trust on a pro rata basis. On December 1, 2003, a
distribution of $2,278,353 was made to the Class B
certificateholders. This payment is reflected as a liability
in the accompanying statement of assets and liabilities.
While the Bonds are outstanding, distributions to the Class
B certificateholders are made 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. The certificateholders shall each be
entitled to one vote per certificate.
6. Allowance For An analysis of the allowance for loan losses for the year
Loan Losses ended November 30, 2003 is summarized as follows:
Balance, beginning of year $1,432,376
Provision -
Charge-offs -
------------------------------------------------------------
Balance, end of year $1,432,376
============================================================
At November 30, 2003, there were no recorded investments in
loans that are considered to be impaired. See Note 2(e) for
a discussion of the Trust's impaired loan accounting policy.
19
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, 2003, excluding payments for Loans in Default,
as defined in the Indenture, are as follows:
Principal Interest
Payments Payments Total
Fiscal year (000's) (000's) (000's)
==========================================================
2004 $ 13,957 $ 3,539 $ 17,496
2005 12,025 3,049 15,074
2006 10,576 2,681 13,257
2007 9,609 2,360 11,969
2008 8,470 2,070 10,540
Thereafter 58,925 9,380 68,305
----------------------------------------------------------
Total $113,562 $23,079 $136,641
==========================================================
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, 2003, there were no Loans in
Default.
20
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
7. Loans The following analysis summarize the stratification of the
(Continued) Loan portfolio by type of collateral and institution as of
November 30, 2003:
Amortized
Number Cost
Type of Collateral of Loans (000's) %
============================================================
Loans secured by a
first mortgage 153 $48,629 60.9%
Loans not secured by
a first mortgage 79 31,240 39.1
------------------------------------------------------------
Total Loans 232 $79,869 100.0%
============================================================
Amortized
Number Cost
Type of Institution of Loans (000's) %
============================================================
Private 156 $49,098 61.5%
Public 76 30,771 38.5
------------------------------------------------------------
Total Loans 232 $79,869 100.0%
============================================================
The ability of a borrower to meet future debt service
payments on a Loan will depend on a number of factors
relevant to the financial condition of such borrower,
including, among others, the size and diversity of the
borrower's sources of revenues; enrollment trends;
reputation; management expertise; the availability and
restrictions on the use of endowments and other funds; the
quality and maintenance costs of the borrower's facilities
and, in the case of some Loans to public institutions, which
are obligations of a state, the financial condition of the
relevant state or other governmental entity and its policies
with respect to education. The ability of a borrower to
maintain enrollment levels will depend on such factors as
tuition costs, geographical location, geographic diversity,
quality of the student body, quality of the faculty and the
diversity of program offerings.
21
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
7. Loans The collateral for Loans that are secured by a mortgage on
(Continued) 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.
8. Fair Value Statement of Financial Accounting Standards No. 107,
of Financial "Disclosures about Fair Value of Financial Instruments,"
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.
22
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
8. Fair Value The estimated fair value of each category of the Trust's
of Financial financial instruments and the related book value presented
Instruments in the accompanying statement of assets and liabilities as
(Continued) of November 30, 2003 is as follows:
Amortized
Cost Fair Value
(000's) (000's)
==========================================================
Loans $78,437* $104,746
Investment Agreements:
Revenue Fund 13,547 14,326
Liquidity Fund 2,171 2,569
----------------------------------------------------------
$94,155 $121,641
==========================================================
Bonds $78,762 $95,318
==========================================================
*Net of allowance for loan losses of $1,432,376.
23
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 2003
(Dollar Amounts in Thousands)
Internal
Outstanding Stated Rate of Amortized
Principal Interest Maturity Return % (A) Cost (Notes
Balance Description Rate % Date (Unaudited) 1 and 2)
---------- ----------- -------- -------- ------------ -----------
COLLEGE AND UNIVERSITY LOANS (83.3%)
---------- ALABAMA --------
$145 Alabama Agricultural and Mechanical University 3.000-3.750 07/01/2005 10.25 $129
1,550 Alabama Agricultural and Mechanical University 3.000 05/01/2018 10.27 998
1,835 Auburn University 3.000 12/01/2018 9.16 1,208
145 Huntingdon College 3.000 10/01/2008 10.60 117
28 Stillman College 3.750 02/01/2004 11.42 27
309 Talladega College 3.000 12/01/2012 10.24 223
1,050 University of Alabama in Birmingham 3.000 11/01/2008 7.97 912
---------- ARIZONA --------
480 Arizona State University 3.000 04/01/2006 10.60 431
---------- ARKANSAS --------
16 Ouachita Baptist University 3.000 12/01/2006 10.04 14
103 University of Arkansas at Little Rock 3.000 11/01/2009 9.42 85
153 University of Central Arkansas 3.000 04/01/2005 10.69 141
---------- CALIFORNIA --------
169 Azusa Pacific University 3.750 04/01/2015 10.88 117
485 California Polytechnic State University 3.000 11/01/2007 10.05 411
140 California State University 3.000 11/01/2006 8.75 125
905 California State University 3.000 11/01/2013 8.93 678
2,178 California State University 3.000 11/01/2019 8.99 1,430
420 Chapman College 3.000 10/01/2013 10.65 294
107 Chapman College 3.000 11/01/2005 10.63 96
112 Chapman College 3.000 11/01/2007 10.57 94
35 Gavilan College 3.000 04/01/2006 10.59 31
399 Lassen Junior College District 3.000 04/01/2020 10.27 245
232 Occidental College 3.000 10/01/2019 10.41 139
365 San Diego State University 3.000 11/01/2006 10.04 319
35 State Center Community College 3.000 10/01/2004 10.10 33
1,390 University Student Co-Operative Association 3.000 04/01/2019 10.70 869
13 West Kern Junior College District 3.625 04/01/2004 10.73 12
295 West Valley College 3.000 04/01/2009 10.50 240
---------- COLORADO --------
230 Fort Lewis College 3.000 10/01/2006 10.09 200
375 Regis College (Denver) 3.000 11/01/2012 10.47 269
---------- DELAWARE --------
166 Wesley College 3.375 05/01/2013 10.88 123
500 University of Delaware 3.000 11/01/2006 9.08 445
564 University of Delaware 3.000 12/01/2018 8.81 378
The accompanying notes are an integral part of this schedule
24
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 2003
(Dollar Amounts in Thousands)
(continued)
Internal
Outstanding Stated Rate of Amortized
Principal Interest Maturity Return % (A) Cost (Notes
Balance Description Rate % Date (Unaudited) 1 and 2)
---------- ----------- -------- -------- ------------ -----------
---------- FLORIDA --------
$240 Embry-Riddle Aeronautical University 3.000 09/01/2007 10.64 $199
38 Florida Agricultural and Mechanical University 3.625 07/01/2004 10.29 35
17 Florida Atlantic University 3.500 07/01/2004 10.27 16
145 Florida Atlantic University 3.000 07/01/2006 10.18 125
116 Florida Institute of Technology 3.000 11/01/2009 10.53 91
430 Florida State University 3.000 01/01/2009 9.40 363
225 Nova University 3.000 12/01/2007 10.04 189
83 Stetson University 3.000 01/01/2006 11.25 73
255 University of Central Florida 3.000 10/01/2007 10.08 215
1,725 University of Florida 3.000 07/01/2014 10.15 1,183
280 University of South Florida 3.750 07/01/2005 10.30 252
---------- GEORGIA --------
121 Emmanuel College 3.000 11/01/2013 10.45 84
103 Georgia Education Authority Board of Regents
of the University System of Georgia 3.375 01/01/2003 10.60 103
195 LaGrange College 3.000 03/01/2009 11.06 155
363 Mercer University 3.000 05/01/2014 10.58 253
570 Morehouse College 3.000 07/01/2010 10.50 420
106 Morris Brown College 3.750 05/01/2007 11.12 92
1,336 Morris Brown College 2.750-3.750 05/01/2018 10.89 884
743 Paine College 3.000 10/01/2016 10.45 479
---------- ILLINOIS --------
615 Concordia College 3.000 05/01/2019 10.65 374
132 Kendall College 3.000 10/01/2008 10.59 107
150 Knox College 3.000 04/01/2006 11.15 133
990 Sangamon State University 3.000 11/01/2018 10.12 640
---------- INDIANA --------
105 Anderson University 3.000 03/01/2006 11.19 93
108 Indiana University 3.750 12/01/2003 8.84 103
215 Purdue University 3.625 07/01/2004 9.33 201
78 Purdue University 3.000 07/01/2005 9.26 71
197 Taylor University 3.000 10/01/2012 10.50 141
611 Taylor University 3.000 10/01/2013 10.49 427
842 University of Notre Dame 3.000 02/15/2019 10.62 514
3,310 Vincennes University 3.000 06/01/2023 9.02 1,992
---------- IOWA --------
50 NIACC Dormitories, Inc. 3.000 10/01/2012 10.27 36
254 Simpson College 3.000 07/01/2016 10.58 161
73 Waldorf College 3.000 07/01/2005 10.77 65
112 Wartburg College 3.750 04/01/2011 11.00 86
The accompanying notes are an integral part of this schedule.
25
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 2003
(Dollar Amounts in Thousands)
(continued)
Internal
Outstanding Stated Rate of Amortized
Principal Interest Maturity Return % (A) Cost (Notes
Balance Description Rate % Date (Unaudited) 1 and 2)
---------- ----------- -------- -------- ------------ -----------
---------- KANSAS --------
$80 Fort Hays State University 3.000 10/01/2007 10.08 $68
67 Hesston College 3.000 04/01/2006 11.14 59
170 Kansas State University 3.625 04/01/2004 9.77 164
---------- KENTUCKY --------
10 Bellarmine College 3.625 05/01/2004 11.34 10
319 Georgetown College 3.000 12/01/2008 10.04 260
600 Georgetown College 3.000 12/01/2009 10.05 474
156 Spalding University 3.000 09/01/2007 10.66 132
302 Transylvania University 3.000 11/01/2010 10.51 230
---------- LOUISIANA --------
131 Dillard University 3.000 04/01/2008 11.09 112
166 Louisiana State University 3.625 07/01/2004 9.04 155
98 Louisiana State University 3.000 07/01/2005 8.84 90
115 Louisiana State University 3.000 07/01/2006 8.87 103
---------- MARYLAND --------
221 Hood College 3.625 11/01/2014 10.54 157
1,727 Morgan State University 3.000 11/01/2014 10.56 1,188
---------- MASSACHUSETTS --------
67 Becker Junior College 3.000 04/01/2005 11.21 62
830 Bentley College 3.000 11/01/2007 10.57 695
18 Boston Architectural Center 3.750 11/01/2004 10.77 17
199 Brandeis University 3.000 11/01/2011 10.64 149
750 College of the Holy Cross 3.625 10/01/2013 10.60 546
325 College of the Holy Cross 3.000 10/01/2006 10.63 280
290 Hampshire College 3.000 07/01/2013 10.75 202
1,057 Hampshire College 3.000 02/01/2014 10.70 729
2,506 Northeastern University 3.000 05/01/2018 10.53 1,573
13 Northeastern University 3.000 05/01/2004 10.97 13
353 Springfield College 3.500 05/01/2013 10.67 265
22 Springfield College 3.000 05/15/2005 10.11 21
1,985 Tufts University 3.000 10/01/2021 10.39 1,140
635 Wheaton College 3.500 04/01/2013 10.70 463
18 Wheelock College 3.000 05/01/2011 10.23 14
---------- MICHIGAN --------
87 Albion College 3.000 10/01/2009 10.56 68
96 Concordia College 3.000 04/01/2009 11.05 82
235 Harper Grace Hospital 3.625 04/01/2005 11.26 217
1,100 Mercy College of Detroit 3.625 10/01/2013 10.59 788
750 University of Michigan 3.750 10/01/2005 9.51 687
The accompanying notes are an integral part of this schedule.
26
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 2003
(Dollar Amounts in Thousands)
(continued)
Internal
Outstanding Stated Rate of Amortized
Principal Interest Maturity Return % (A) Cost (Notes
Balance Description Rate % Date (Unaudited) 1 and 2)
---------- ----------- -------- -------- ------------ -----------
---------- MINNESOTA --------
$1,110 Chateau Community Housing Association 3.000 10/01/2012 10.51 $795
324 College of Saint Thomas 3.000 11/01/2009 10.53 255
377 MacAlester College 3.000 05/01/2020 10.46 228
---------- MISSISSIPPI --------
1,449 Hinds Junior College 3.000 04/01/2013 10.42 1,069
496 Millsaps College 3.000 11/01/2021 10.34 286
1,350 Mississippi State University 3.000 12/01/2020 9.64 830
---------- MISSOURI --------
94 Central Missouri State University 3.625 07/01/2004 10.29 87
475 Central Missouri State University 3.000 07/01/2007 10.18 397
217 Drury College 3.000 04/01/2015 10.63 147
325 Drury College 3.000 10/01/2010 10.75 250
541 Southeast Missouri State University 3.000 04/01/2007 10.58 475
---------- MONTANA --------
270 Carroll College 3.750 06/01/2014 10.46 189
138 Carroll College 3.000 06/01/2018 10.15 87
---------- NEBRASKA --------
32 Midland Lutheran College 3.000 04/01/2005 11.20 29
---------- NEW HAMPSHIRE --------
127 New England College 3.000 04/01/2016 10.77 83
---------- NEW JERSEY --------
1,350 Fairleigh Dickinson University 3.000 11/01/2017 10.39 852
515 Newark Beth Israel Hospital 3.625 01/01/2014 11.06 360
1,350 Rider College 3.625 11/01/2013 10.42 978
362 Rider College 3.000 05/01/2017 10.70 232
555 Rutgers, The State University 3.750 05/01/2016 9.19 411
---------- NEW MEXICO --------
64 College of Santa Fe 3.000 10/01/2005 10.66 57
491 College of Santa Fe 3.000 10/01/2018 10.43 305
---------- NEW YORK --------
1,275 Canisius College 3.000 11/01/2017 10.40 805
788 College of Saint Rose 3.000 05/01/2022 10.43 453
505 Daemen College 3.000 04/01/2016 10.77 331
404 Dowling College 3.000 10/01/2010 10.75 311
902 D'Youville College 3.000 04/01/2018 10.90 557
1,455 Hofstra University 3.000 11/01/2012 10.61 1,058
250 Long Island University 3.750 05/01/2005 11.22 232
133 Long Island University 3.000 11/01/2009 10.69 106
464 Long Island University 3.000 11/01/2009 10.69 369
425 Long Island University 3.625 06/01/2014 10.49 295
21 Long Island University 3.750 10/01/2004 10.79 20
734 Memorial Hospital for Cancer and Allied Diseases 3.375 04/01/2012 10.68 553
165 SUNY, Mohawk Valley Community College 3.000 04/01/2005 10.26 153
309 Utica College 3.000 11/01/2009 10.53 243
The accompanying notes are an integral part of this schedule.
27
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 2003
(Dollar Amounts in Thousands)
(continued)
Internal
Outstanding Stated Rate of Amortized
Principal Interest Maturity Return % (A) Cost (Notes
Balance Description Rate % Date (Unaudited) 1 and 2)
---------- ----------- -------- -------- ------------ -----------
---------- NORTH CAROLINA --------
$149 Catawba College 3.000 12/01/2009 10.27 $115
310 Elizabeth City State University 3.000 10/01/2017 10.02 201
210 High Point College 3.000 12/01/2010 10.26 157
94 Lenoir Rhyne College 3.000 12/01/2006 10.04 82
105 North Carolina State University 3.625 09/01/2004 7.97 100
27 Queens College 3.625 07/01/2004 10.90 25
35 Saint Mary's College 3.000 03/01/2005 11.25 32
360 Saint Mary's College 3.000 06/01/2020 10.14 218
202 University of North Carolina 3.000 11/01/2005 8.81 187
345 University of North Carolina 3.000 01/01/2008 9.50 293
25 University of North Carolina 3.000 01/01/2007 9.50 22
---------- OHIO --------
56 Rio Grande College 3.000 03/30/2009 10.93 45
224 University of Steubenville 3.125 04/01/2010 10.98 174
615 Wittenberg University 3.000 05/01/2015 10.76 414
193 Wittenberg University 3.000 11/01/2017 10.39 122
27 Wooster Business College 3.000 03/30/2009 10.88 21
389 Wright State University 3.000 05/01/2009 9.89 327
---------- OKLAHOMA --------
1,180 Cameron University 3.000 04/01/2007 10.16 1,028
525 Langston University 3.000 04/01/2007 10.56 453
80 Southern Nazarene University 3.750 04/01/2005 11.27 74
---------- OREGON --------
647 George Fox College 3.000 07/01/2018 10.64 401
67 Linfield College 3.000 10/01/2017 10.44 42
590 University of Portland 3.375 04/01/2013 10.88 433
---------- PENNSYLVANIA --------
408 Albright College 3.000 11/01/2015 10.23 278
170 Carnegie-Mellon University 3.000 05/01/2009 10.73 137
820 Carnegie-Mellon University 3.000 11/01/2017 10.51 524
960 Drexel University 3.500 05/01/2014 10.53 695
490 Gannon University 3.000 11/01/2011 10.49 362
179 Gannon University 3.000 12/01/2022 10.13 102
189 Lycoming College 3.625 05/01/2014 10.64 136
265 Lycoming College 3.750 05/01/2015 10.62 188
162 Moravian College 3.375 11/01/2012 10.52 118
2,087 Philadelphia College of Art 3.000 01/01/2022 10.62 1,176
485 Saint Vincent College 3.500 05/01/2013 10.86 352
257 Seton Hill College 3.625 11/01/2014 10.53 180
985 Villanova University 3.000 04/01/2019 10.70 598
307 York Hospital 3.000 05/01/2020 10.64 184
---------- RHODE ISLAND --------
70 Rhode Island College 3.000 10/01/2005 10.09 63
The accompanying notes are an integral part of this schedule.
28
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 2003
(Dollar Amounts in Thousands)
(continued)
Internal
Outstanding Stated Rate of Amortized
Principal Interest Maturity Return % (A) Cost (Notes
Balance Description Rate % Date (Unaudited) 1 and 2)
---------- ----------- -------- -------- ------------ -----------
---------- SOUTH CAROLINA --------
$22 Benedict College 3.750 11/01/2004 10.75 $21
332 Benedict College 3.000 11/01/2006 10.61 290
1,532 Benedict College 3.000 11/01/2020 10.36 904
105 Clemson University 3.000 07/01/2005 9.51 95
98 Coker College 3.000 12/01/2009 10.04 77
44 Columbia College 3.625 07/01/2004 10.90 40
30 Columbia College 3.000 07/01/2006 10.80 26
368 Morris College 3.000 11/01/2009 10.53 289
---------- SOUTH DAKOTA --------
145 Dakota Wesleyan University 3.000 10/01/2015 10.46 96
330 South Dakota School of Mines and Technology 3.000 04/01/2018 10.30 210
---------- TENNESSEE --------
258 Cumberland University 3.000 08/01/2017 10.52 159
166 Hiwassee College 3.000 09/15/2018 10.58 102
---------- TEXAS --------
78 Cisco Junior College 3.000 07/01/2005 10.15 74
305 Houston Tillotson College 3.500 04/01/2014 10.90 216
340 McLennan Community College 3.000 04/01/2006 10.49 305
268 Southern Methodist University 3.000 10/01/2007 10.61 224
1,830 Southwest Texas State University 3.000 10/01/2015 9.51 1,269
1,397 Stephen F. Austin State University 3.375-3.500 10/01/2012 9.57 1,062
411 Texas A & I University 3.000 07/01/2009 9.57 330
380 Texas Southern University 3.500 04/01/2013 10.45 279
546 University of Saint Thomas 3.000 10/01/2019 10.41 327
---------- VERMONT --------
116 Champlain College 3.000 12/01/2013 10.19 80
1,426 Saint Michael's College 3.000 05/01/2013 10.60 1,022
260 Vermont State College 3.000 06/01/2008 9.02 217
196 Vermont State College 3.000 07/01/2014 9.30 140
---------- VIRGINIA --------
192 Randolph-Macon College 3.000 05/01/2010 10.72 151
1,040 James Madison University 3.000 06/01/2009 10.49 809
398 Lynchburg College 3.750 05/01/2015 10.64 285
540 Lynchburg College 3.000 05/01/2018 10.68 340
303 Mary Baldwin College 3.375 05/01/2012 10.68 229
510 Marymount University 3.000 05/01/2016 10.52 339
2,461 Norfolk State University 3.000 12/01/2021 9.77 1,464
392 Saint Paul's College 3.000 11/01/2014 10.56 274
1,772 Virginia Commonwealth University 3.000 06/01/2011 10.01 1,321
185 Virginia Commonwealth University 3.000 06/01/2004 10.08 170
195 Virginia Wesleyan College 3.000 11/01/2009 10.54 156
128 Virginia Wesleyan College 3.000 11/01/2010 10.51 98
The accompanying notes are an integral part of this schedule.
29
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
November 30, 2003
(Dollar Amounts in Thousands)
(continued)
Internal
Outstanding Stated Rate of Amortized
Principal Interest Maturity Return % (A) Cost (Notes
Balance Description Rate % Date (Unaudited) 1 and 2)
---------- ----------- -------- -------- ------------ -----------
---------- WASHINGTON --------
$145 Olympic Community College 3.000 10/01/2008 10.07 $123
282 Seattle University 3.000 11/01/2008 10.55 229
140 Washington State University 3.625 04/01/2004 10.02 135
90 Washington State University 3.750 04/01/2004 10.03 87
110 Western Washington University 3.625 10/01/2004 10.18 103
140 Western Washington University 3.750 10/01/2005 10.19 127
---------- WEST VIRGINIA --------
211 Bethany College 3.375 11/01/2012 10.54 157
230 Bethany College 3.000 11/01/2017 10.40 146
380 Bethany College 3.000 11/01/2012 10.40 278
40 Wheeling College 3.000 11/01/2007 10.59 34
---------- WISCONSIN --------
370 Carroll College 3.750 03/01/2015 10.93 263
435 Marian College 3.000 10/01/2016 10.45 281
42 Saint Norbert College 3.625 04/01/2004 11.33 40
191 Saint Norbert College 3.000 04/01/2007 11.10 164
---------- DISTRICT OF COLUMBIA --------
2,399 Georgetown University 3.000 11/01/2020 10.36 1,415
6,205 Georgetown University 4.000 11/01/2020 10.52 3,933
312 Georgetown University 3.000 05/01/2005 10.86 288
---------- PUERTO RICO --------
55 Inter American University of Puerto Rico 3.000 09/01/2007 10.66 46
1,986 Inter American University of Puerto Rico 3.000 01/01/2017 10.94 1,259
1,209 University of Puerto Rico, Rio Piedras Campus 3.000 06/01/2011 9.39 923
- ------------ -------------
113,562 Total College and University Loans 79,869
- ------------ -------------
Allowance for Loan Losses 1,432
-------------
Net Loans of the Trust 78,437 (B)
-------------
INVESTMENT AGREEMENTS (16.7%)
2,171 JPMorgan Chase Bank - Liquidity Fund 7.750 06/01/2018 7.750 2,171
13,547 JPMorgan Chase Bank - Revenue Fund 7.050 06/01/2018 7.050 13,547
- ------------ -------------
15,718 Total Investment Agreements 15,718
- ------------ -------------
$129,280 Total Investments (100.0%) $94,155
============ =============
(A) Represents the rate of return based on the contributed cost and the amortization to maturity.
(B) The tax basis on the Loans is approximately $81,231,000.
The accompanying notes are an integral part of this schedule.
30
ITEM 2. CODE OF ETHICS
Not applicable to the registrant.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
Not applicable to the registrant.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable until annual reports for fiscal years ending after
December 15, 2003.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable to the registrant.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable to the registrant.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES
(a) The registrant's Owner Trustee has concluded that as of a date within 90
days of the filing of this report there were no significant deficiencies in the
design or operation of the disclosure controls and procedures of the registrant
which would have adversely affected the ability of the registrant to record,
process, summarize and report the subject matter contained in this report.
(b) There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
10(a)(2) Certification of the Owner Trustee pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
10(b)(1) Certification of the Owner Trustee pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): College and University Facility Loan Trust Two
----------------------------------------------
By: US Bank, not in its individual capacity, but solely as Owner Trustee under
a Declaration of Trust dated March 11, 1988 and Amended and restated on May
12, 1988, and December 4, 1989.
By: /s/ Diana J. Kenneally
-------------------------------------
Assistant Vice President
Date: February 13, 2004
-------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: US Bank, not in its individual capacity, but solely as Owner Trustee under
a Declaration of Trust dated March 11, 1988 and Amended and restated on May
12, 1988, and December 4, 1989.
By: /s/ Diana J. Kenneally
-------------------------------------
Assistant Vice President
Date: February 13, 2004
-------------------------------------