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
-----------------------------------
(Exact name of registrant as specified in charter)
c/o U.S. Bank One Federal Street Boston, MA 02110
-----------------------------------
(Address of principal executive offices) (Zip code)
Diana J. Kenneally
U.S. Bank Corporate Trust Services
One Federal Street
Boston, MA 02110
-----------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (617) 603-6406
Date of fiscal year end: November 30
Date of reporting period: December 1, 2003 - May 31, 2004
ITEM 1. REPORT TO STOCKHOLDERS.
College and University
Facility Loan Trust Two
Financial Statements
Six Months Ended May 31, 2004
Accountants' Compilation Report
To the Owner Trustee of
College and University Facility
Loan Trust Two
We have compiled the accompanying statement of assets and liabilities of College
and University Facility Loan Trust Two (the "Trust"), including the schedule of
investments, as of May 31, 2004, and the related statements of operations, cash
flows, changes in net assets and financial highlights for the six months then
ended, in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants. The
financial information for the years ended November 30, 2003, 2002, 2001, 2000
and 1999, presented herein for comparative purposes, was audited by other
auditors, whose report thereon dated January 29, 2004 expressed an unqualified
opinion, except for the effect on the 2003 and 2002 financial statements of
accounting for investments under the amortized cost method of accounting as
described in Note 2 to the financial statements.
A compilation is limited to presenting in the form of financial statements
information that has been obtained from the books and records of the Trust. We
have not audited or reviewed the accompanying financial statements or
supplemental material and, accordingly, do not express an opinion or any other
form of assurance on them. However, we did become aware of a departure from
accounting principals generally accepted in the United States of America that is
described in the following paragraph.
As disclosed 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 losses. Accounting principals 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 the Trust's estimate of fair value as
described in Note 8, would result in an increase of approximately $23,219,000 in
the recorded value of the investments and an increase in unrealized appreciation
of investment of approximately $23,219,000 as of May 31, 2004.
We are not independent with respect to College and University Facility Loan
Trust Two.
/s/ BDO Seidman, LLP
July 15, 2004
College and University
Facility Loan Trust Two
Statement of Assets and Liabilities
================================================================================
May 31, 2003
======================================================================================
Assets:
Investments, at amortized cost, net of allowance for loan losses of
$1,432,376 (Notes 2, 6, 7 and 8, and Schedule of Investments) $ 86,078,149
Cash 149,062
Prepaid expenses 13,750
Interest receivable 861,615
Deferred bond issuance costs (Note 2) 268,261
- --------------------------------------------------------------------------------------
Total assets 87,370,837
- --------------------------------------------------------------------------------------
Liabilities:
Bonds payable, net of unamortized discount (Notes 3 and 8) 71,613,566
Interest payable (Note 3) 1,793,564
Accrued expenses and other liabilities 221,042
Distribution payable to Class B certificateholders (Note 5) 1,381,128
- --------------------------------------------------------------------------------------
Total liabilities 75,009,300
- --------------------------------------------------------------------------------------
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) (2,545,026)
Additional paid-in capital (Note 2) 13,142,763
- --------------------------------------------------------------------------------------
Total net assets $ 12,361,537
======================================================================================
Net asset value per Class B certificate
(based on 1,763,800 certificates outstanding) $ 7.01
======================================================================================
See accompanying accountants' compilation report
and notes to financial statements.
3
College and University
Facility Loan Trust Two
Statement of Operations
================================================================================
Six months ended May 31, 2004
======================================================================================
Investment income:
Interest income (Note 2) $5,612,819
- --------------------------------------------------------------------------------------
Expenses:
Interest expense (Notes 2 and 3) 3,756,425
Servicer fees (Note 4) 44,968
Trustee fees (Note 4) 22,665
Other trust and bond administration expenses 158,162
- --------------------------------------------------------------------------------------
Total expenses 3,982,220
- --------------------------------------------------------------------------------------
Net investment income 1,630,599
- --------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,630,599
======================================================================================
See accompanying accountants' compilation report
and notes to financial statements.
4
College and University
Facility Loan Trust Two
Statement of Cash Flows
================================================================================
Six months ended May 31, 2004
======================================================================================
Cash flows from operating activities:
Interest received $ 2,096,644
Interest paid (1,975,195)
Operating expenses paid (280,004)
- --------------------------------------------------------------------------------------
Net cash used in operating activities (158,555)
- --------------------------------------------------------------------------------------
Cash flows from investing activities:
Net increase in funds held under investment agreements 1,430,476
Principal payments on Loans 10,187,032
- --------------------------------------------------------------------------------------
Net cash provided by investing activities 11,617,508
- --------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal repayments on Bonds (9,081,538)
Distributions to Class B certificateholders (2,278,353)
- --------------------------------------------------------------------------------------
Net cash used in financing activities (11,359,891)
- --------------------------------------------------------------------------------------
Net increase in cash 99,062
Cash, beginning of period 50,000
- --------------------------------------------------------------------------------------
Cash, end of period $ 149,062
======================================================================================
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 $ 1,630,599
Increase in prepaid expenses (13,750)
Decrease in interest receivable 24,095
Decrease in accrued expenses and other liabilities (40,459)
Decrease in Bond interest payable (181,631)
Amortization of original issue discount on Bonds 1,933,026
Amortization of purchase discount on Loans (3,540,270)
Amortization of deferred Bond issuance costs 29,835
- --------------------------------------------------------------------------------------
Net cash used in operating activities $ (158,555)
======================================================================================
See accompanying accountants' compilation report
and notes to financial statements.
5
College and University
Facility Loan Trust Two
Statement of Changes in Net Assets
(Note 2(f))
================================================================================
For the
Six Months
Ended Year Ended
May 31, November 30,
2004 2003
===================================================================================================
(Unaudited) (Audited)
From operations:
Net investment income $ 1,630,599 $ 1,838,312
- ---------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Class B
certificateholders resulting from operations 1,630,599 1,838,312
- ---------------------------------------------------------------------------------------------------
Capital certificate transactions:
Distributions to Class B certificateholders (Note 5) 1,381,128 (3,204,355)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 249,471 (1,366,043)
Net assets:
Beginning of period 12,112,066 13,478,109
- ---------------------------------------------------------------------------------------------------
End of period $12,361,537 $12,112,066
===================================================================================================
See accompanying accountants' compilation report
and notes to financial statements.
6
College and University
Facility Loan Trust Two
Financial Highlights
(Notes 1 and 5)
================================================================================
For the
Six Months
Ended Years Ended November 30,
May 31, ------------------------------------------------------------------------------
2004 2003 2002 2001 2000 1999
====================================================================================================================================
(Unaudited) (Audited)
------------------------------------------------------------------------------
Net asset value, beginning of period $6.87 $ 7.64 $ 8.53 $ 9.01 $10.05 $ 9.45
Net investment income .92 1.04 1.37 1.15 1.34 1.38
Provision for loan losses -- -- -- -- (.17) --
Dividends to Class A Preferred
certificateholders:
From net investment income -- -- -- -- -- --
As tax return of capital -- -- -- -- -- (.11)
Distribution to Class B
certificateholders:
As tax return of capital (.78) (1.81) (2.26) (1.63) (2.21) (.67)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $7.01 $ 6.87 $ 7.64 $ 8.53 $ 9.01 $10.05
====================================================================================================================================
Total investment return (a) N/A N/A N/A N/A N/A N/A
Net assets applicable to Class A
Preferred certificates,
end of period $ -- $ -- $ -- $ -- $ -- $ --
====================================================================================================================================
Net assets applicable to Class B
certificates, end of period $12,361,537 $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 65.09%(b)(c) 66.777%(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 26.65(c) 14.37% 16.97% 13.05% 14.10% 14.13%
Number of Class B certificates
outstanding, end of period 1,763,800 1,763,800 1,763,800 1,763,800 1,763,800 1,763,800
(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
3.69%(c), 3.26%, 2.76%, 2.72%, 2.53% and 2.57% in 2004, 2003, 2002, 2001, 2000 and 1999, respectively.
(c) Annualized.
See accompanying accountants' compilation report and notes to 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, a 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.
See accompanying accountants' compilation report.
8
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
1. Organization and All payments on the Loans and earnings under the
Business investment agreements and any required transfers from the
(Continued) 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 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 May 31, 2004 was
approximately $30,152,000. As a result of prepayments of
Loans in the six months ended May 31, 2004, additional
interest income of approximately $1,255,000 was recognized.
See accompanying accountants' compilation report.
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
Policies interest on Loans for which payment of principal or
(Continued) 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 generally
recognized when received. Payments are generally applied to
interest first, with the balance, if any, applied to
principal. At May 31, 2004, 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.
See accompanying accountants' compilation report.
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.
See accompanying accountants' compilation report.
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.
See accompanying accountants' compilation report.
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.
As of November 30, 2003, all tax earnings and profits have
been distributed. Accordingly, all accumulated
undistributed net investment income has been reclassified
to paid-in capital. This reclassification results from
permanent book and tax differences such as the receipt of
tax-exempt interest income on certain Loans, the related
interest expense on the Bonds, and the accretion of
purchase discount on the Loans. Amounts deducted for the
loan loss reserve are not currently deductible for tax
purposes and have been reclassified as an accumulated
deficit. These reclassifications had no impact on the net
investment income or net assets of the Trust.
The Trust expects to have a tax return of capital for the
fiscal year ending November 30, 2004; however, the amount
cannot be reasonably estimated at May 31, 2004.
See accompanying accountants' compilation report.
13
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, the Trust evaluates the estimates used,
including those related to the allowance for loan losses.
The Trust bases its estimates on historical experience,
actuarial estimates, current conditions and various other
assumptions that the Trust believes 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. These estimates are used to assist the Trust 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.
See accompanying accountants' compilation report.
14
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
3. Bonds The Bonds outstanding at May 31, 2004 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 $89,678 $18,064 $71,614
Interest on the Bonds is payable semiannually. On June 1,
2004, the Trust made a principal payment of $6,941,626 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.
See accompanying accountants' compilation report.
15
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
3. Bonds The estimated aggregate principal payments on the Bonds
(Continued) at May 31, 2004 after taking into consideration actual Loan
prepayments, Defaulted Loans and the Maximum Principal
Distribution Amount, as defined in the Indenture, are as
follows:
Amount
Fiscal Year (000's)
===========================================================
2004 $ 6,942
2005 10,714
2006 9,283
2007 8,241
2008 7,274
Thereafter 47,224
-----------------------------------------------------------
Total $ 89,678
===========================================================
Actual Bond principal payments may differ from estimated
payments because borrowers may prepay or default on their
obligations. The Bonds are not subject to optional
redemption by either the Trust or the bondholders.
In the event of negative cash flows, a Liquidity Fund has
been established and maintained such that, on or before
such payment date, the Liquidity Fund may be used by the
Bond Trustee to make any required payments on the Bonds and
to pay operating expenses of the Trust. The original issue
discount is being amortized using the effective interest
rate method over the estimated lives of the Bonds, which
are based on the scheduled payments of the Loans.
Accordingly, loan prepayments have the effect of
accelerating bond payments. When Bond payments occur sooner
than estimated payments, a portion of the original issue
discount is expensed in the year of prepayment, so that the
future effective interest rate on the Bonds remains
unchanged.
See accompanying accountants' compilation report.
16
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 six months ended May 31, 2004, this fee
totaled $43,368. 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 six months ended May 31,
2004, out-of-pocket expenses totalled $1,600.
(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
$7,500 and $6,250, respectively, for the six months
ended May 31, 2004.
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 six months ended May 31, 2004,
total Bond Trustee fees and out-of-pocket expenses
amounted to $8,915.
See accompanying accountants' compilation report.
17
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 June 1, 2004, a distribution
of $1,381,128 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 six
Loan Losses months ended May 31, 2004 is summarized as follows:
Balance, beginning of year $ 1,432,376
Provision --
Charge-offs --
-----------------------------------------------------------
Balance, end of year $ 1,432,376
===========================================================
At May 31, 2004, 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.
See accompanying accountants' compilation report.
18
College and University
Facility Loan Trust Two
Notes to Financial Statements
================================================================================
7. Loans Scheduled principal and interest payments on the Loans as
of May 31, 2004, 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 $ 8,180 $ 1,645 $ 9,825
2005 11,300 2,919 14,219
2006 9,854 2,573 12,427
2007 9,013 2,272 11,285
2008 8,080 2,000 10,080
Thereafter 56,948 9,142 66,090
-----------------------------------------------------------
Total $103,375 $20,551 $123,926
===========================================================
Expected payments may differ from contractual payments
because borrowers may prepay or default on their
obligations. Accordingly, actual principal and interest on
the Loans may vary significantly from the scheduled
payments. As of May 31, 2004, there were no Loans in
Default.
See accompanying accountants' compilation report.
19
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
May 31, 2004:
Amortized
Number Cost
Type of Collateral of Loans (000's) %
===========================================================
Loans secured by a
first mortgage 143 $44,480 60.8%
Loans not secured by
a first mortgage 70 28,743 39.2
-----------------------------------------------------------
Total Loans 213 $73,223 100.0%
===========================================================
Amortized
Number Cost
Type of Institution of Loans (000's) %
===========================================================
Private 147 $44,869 61.3%
Public 66 28,354 38.7
-----------------------------------------------------------
Total Loans 213 $73,223 100.0%
===========================================================
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.
See accompanying accountants' compilation report.
20
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.
See accompanying accountants' compilation report.
21
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 May 31, 2004 is as follows:
Amortized
Cost Fair Value
(000's) (000's)
===========================================================
Loans $71,791* $ 94,115
Investment Agreements:
Revenue Fund 12,338 13,011
Liquidity Fund 1,949 2,171
-----------------------------------------------------------
$86,078 $109,297
===========================================================
Bonds $71,614 $ 84,927
===========================================================
*Net of allowance for loan losses of $1,432,376.
See accompanying accountants' compilation report.
22
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
-----------------------
May 31,2004
-----------
(Dollar Amounts in Thousands)
Outstanding Stated Internal Amortized
Principal Interest Maturity Rate of Cost (Notes
Balance Description Rate % Date Return % (A) 1 and 2)
- ---------- ------------------------------------------------- ---------- ---------- ------------ -------------
COLLEGE AND UNIVERSITY LOANS (83.4%)
---------- ALABAMA --------
$145 Alabama Agricultural and Mechanical University 3.000-3.750 07/01/2005 10.25 $134
1,465 Alabama Agricultural and Mechanical University 3.000 05/01/2018 10.27 941
1,745 Auburn University 3.000 12/01/2018 9.16 1,147
145 Huntingdon College 3.000 10/01/2008 10.60 121
295 Talladega College 3.000 12/01/2012 10.24 216
1,050 University of Alabama in Birmingham 3.000 11/01/2008 7.97 933
---------- ARKANSAS --------
78 University of Central Arkansas 3.000 04/01/2005 10.69 72
---------- CALIFORNIA --------
158 Azusa Pacific University 3.750 04/01/2015 10.88 110
485 California Polytechnic State University 3.000 11/01/2007 10.05 424
140 California State University 3.000 11/01/2006 8.75 129
905 California State University 3.000 11/01/2013 8.93 695
2,178 California State University 3.000 11/01/2019 8.99 1,462
405 Chapman College 3.000 10/01/2013 10.65 288
107 Chapman College 3.000 11/01/2005 10.63 99
112 Chapman College 3.000 11/01/2007 10.57 97
24 Gavilan College 3.000 04/01/2006 10.59 21
379 Lassen Junior College District 3.000 04/01/2020 10.27 231
232 Occidental College 3.000 10/01/2019 10.41 143
365 San Diego State University 3.000 11/01/2006 10.04 330
1,325 University Student Co-Operative Association 3.000 04/01/2019 10.70 828
250 West Valley College 3.000 04/01/2009 10.50 203
---------- COLORADO --------
230 Fort Lewis College 3.000 10/01/2006 10.09 207
375 Regis College (Denver) 3.000 11/01/2012 10.47 278
---------- DELAWARE --------
150 Wesley College 3.375 05/01/2013 10.88 111
500 University of Delaware 3.000 11/01/2006 9.08 457
534 University of Delaware 3.000 12/01/2018 8.81 356
---------- FLORIDA --------
240 Embry-Riddle Aeronautical University 3.000 09/01/2007 10.64 206
38 Florida Agricultural and Mechanical University 3.625 07/01/2004 10.29 36
17 Florida Atlantic University 3.500 07/01/2004 10.27 16
145 Florida Atlantic University 3.000 07/01/2006 10.18 129
116 Florida Institute of Technology 3.000 11/01/2009 10.53 94
355 Florida State University 3.000 01/01/2009 9.40 300
180 Nova University 3.000 12/01/2007 10.04 151
58 Stetson University 3.000 01/01/2006 11.25 51
255 University of Central Florida 3.000 10/01/2007 10.08 222
See accompanying accountants' compilation report
and notes to financial statements.
23
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
-----------------------
May 31,2004
-----------
(Dollar Amounts in Thousands)
(continued)
Outstanding Stated Internal Amortized
Principal Interest Maturity Rate of Cost (Notes
Balance Description Rate % Date Return % (A) 1 and 2)
- ---------- ------------------------------------------------- ---------- ---------- ------------ -------------
$1,725 University of Florida 3.000 07/01/2014 10.15 $1,217
280 University of South Florida 3.750 07/01/2005 10.30 259
---------- GEORGIA --------
121 Emmanuel College 3.000 11/01/2013 10.45 87
103 Georgia Education Authority Board of Regents
of the University System of Georgia 3.375 01/01/2003 10.60 103
165 LaGrange College 3.000 03/01/2009 11.06 131
348 Mercer University 3.000 05/01/2014 10.58 246
570 Morehouse College 3.000 07/01/2010 10.50 434
81 Morris Brown College 3.750 05/01/2007 11.12 70
1,205 Morris Brown College 2.750-3.750 05/01/2018 10.89 782
743 Paine College 3.000 10/01/2016 10.45 493
---------- ILLINOIS --------
585 Concordia College 3.000 05/01/2019 10.65 354
132 Kendall College 3.000 10/01/2008 10.59 110
100 Knox College 3.000 04/01/2006 11.15 89
960 Sangamon State University 3.000 11/01/2018 10.12 628
---------- INDIANA --------
70 Anderson University 3.000 03/01/2006 11.19 62
215 Purdue University 3.625 07/01/2004 9.33 206
78 Purdue University 3.000 07/01/2005 9.26 73
197 Taylor University 3.000 10/01/2012 10.50 146
611 Taylor University 3.000 10/01/2013 10.49 441
820 University of Notre Dame 3.000 02/15/2019 10.62 507
3,310 Vincennes University 3.000 06/01/2023 9.02 2,032
---------- IOWA --------
47 NIACC Dormitories, Inc. 3.000 10/01/2012 10.27 35
254 Simpson College 3.000 07/01/2016 10.58 166
73 Waldorf College 3.000 07/01/2005 10.77 67
100 Wartburg College 3.750 04/01/2011 11.00 77
---------- KANSAS --------
80 Fort Hays State University 3.000 10/01/2007 10.08 70
45 Hesston College 3.000 04/01/2006 11.14 40
---------- KENTUCKY --------
269 Georgetown College 3.000 12/01/2008 10.04 219
520 Georgetown College 3.000 12/01/2009 10.05 410
156 Spalding University 3.000 09/01/2007 10.66 137
302 Transylvania University 3.000 11/01/2010 10.51 238
---------- LOUISIANA --------
100 Dillard University 3.000 04/01/2008 11.09 85
166 Louisiana State University 3.625 07/01/2004 9.04 159
98 Louisiana State University 3.000 07/01/2005 8.84 92
See accompanying accountants' compilation report
and notes to financial statements.
24
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
-----------------------
May 31,2004
-----------
(Dollar Amounts in Thousands)
(continued)
Outstanding Stated Internal Amortized
Principal Interest Maturity Rate of Cost (Notes
Balance Description Rate % Date Return % (A) 1 and 2)
- ---------- ------------------------------------------------- ---------- ---------- ------------ -------------
$115 Louisiana State University 3.000 07/01/2006 8.87 $106
---------- MARYLAND --------
221 Hood College 3.625 11/01/2014 10.54 161
1,660 Morgan State University 3.000 11/01/2014 10.56 1,158
---------- MASSACHUSETTS --------
278 Hampshire College 3.000 07/01/2013 10.75 196
1,014 Hampshire College 3.000 02/01/2014 10.70 709
32 Becker Junior College 3.000 04/01/2005 11.21 29
18 Boston Architectural Center 3.750 11/01/2004 10.77 17
188 Brandeis University 3.000 11/01/2011 10.64 143
750 College of the Holy Cross 3.625 10/01/2013 10.60 561
325 College of the Holy Cross 3.000 10/01/2006 10.63 290
2,436 Northeastern University 3.000 05/01/2018 10.53 1,549
318 Springfield College 3.500 05/01/2013 10.67 238
15 Springfield College 3.000 05/15/2005 10.11 15
1,985 Tufts University 3.000 10/01/2021 10.39 1,169
580 Wheaton College 3.500 04/01/2013 10.70 422
17 Wheelock College 3.000 05/01/2011 10.23 13
---------- MICHIGAN --------
87 Albion College 3.000 10/01/2009 10.56 70
81 Concordia College 3.000 04/01/2009 11.05 69
120 Harper Grace Hospital 3.625 04/01/2005 11.26 111
1,100 Mercy College of Detroit 3.625 10/01/2013 10.59 810
750 University of Michigan 3.750 10/01/2005 9.51 706
---------- MINNESOTA --------
324 College of Saint Thomas 3.000 11/01/2009 10.53 263
64 College of Santa Fe 3.000 10/01/2005 10.66 59
491 College of Santa Fe 3.000 10/01/2018 10.43 314
367 MacAlester College 3.000 05/01/2020 10.46 225
---------- MISSISSIPPI --------
1,309 Hinds Junior College 3.000 04/01/2013 10.42 964
496 Millsaps College 3.000 11/01/2021 10.34 293
1,290 Mississippi State University 3.000 12/01/2020 9.64 790
---------- MISSOURI --------
94 Central Missouri State University 3.625 07/01/2004 10.29 90
475 Central Missouri State University 3.000 07/01/2007 10.18 410
209 Drury College 3.000 04/01/2015 10.63 144
304 Drury College 3.000 10/01/2010 10.75 237
391 Southeast Missouri State University 3.000 04/01/2007 10.58 343
---------- MONTANA --------
270 Carroll College 3.750 06/01/2014 10.46 194
134 Carroll College 3.000 06/01/2018 10.15 85
See accompanying accountants' compilation report
and notes to financial statements.
25
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
-----------------------
May 31,2004
-----------
(Dollar Amounts in Thousands)
(continued)
Outstanding Stated Internal Amortized
Principal Interest Maturity Rate of Cost (Notes
Balance Description Rate % Date Return % (A) 1 and 2)
- ---------- ------------------------------------------------- ---------- ---------- ------------ -------------
---------- NEBRASKA --------
$16 Midland Lutheran College 3.000 04/01/2005 11.20 $15
---------- NEW HAMPSHIRE --------
119 New England College 3.000 04/01/2016 10.77 77
---------- NEW JERSEY --------
1,350 Fairleigh Dickinson University 3.000 11/01/2017 10.39 876
475 Newark Beth Israel Hospital 3.625 01/01/2014 11.06 331
1,350 Rider College 3.625 11/01/2013 10.42 1,005
342 Rider College 3.000 05/01/2017 10.70 219
520 Rutgers, The State University 3.750 05/01/2016 9.19 384
257 Seton Hill College 3.625 11/01/2014 10.53 185
---------- NEW YORK --------
772 College of Saint Rose 3.000 05/01/2022 10.43 449
470 Daemen College 3.000 04/01/2016 10.77 307
377 Dowling College 3.000 10/01/2010 10.75 295
853 D'Youville College 3.000 04/01/2018 10.90 525
1,384 Hofstra University 3.000 11/01/2012 10.61 1,021
127 Long Island University 3.750 05/01/2005 11.22 118
123 Long Island University 3.000 11/01/2009 10.69 99
429 Long Island University 3.000 11/01/2009 10.69 347
425 Long Island University 3.625 06/01/2014 10.49 303
21 Long Island University 3.750 10/01/2004 10.79 20
659 Memorial Hospital for Cancer and Allied Diseases 3.375 04/01/2012 10.68 496
85 SUNY, Mohawk Valley Community College 3.000 04/01/2005 10.26 79
309 Utica College 3.000 11/01/2009 10.53 251
---------- NORTH CAROLINA --------
137 Catawba College 3.000 12/01/2009 10.27 107
310 Elizabeth City State University 3.000 10/01/2017 10.02 206
196 High Point College 3.000 12/01/2010 10.26 148
69 Lenoir Rhyne College 3.000 12/01/2006 10.04 60
105 North Carolina State University 3.625 09/01/2004 7.97 102
27 Queens College 3.625 07/01/2004 10.90 26
18 Saint Mary's College 3.000 03/01/2005 11.25 17
342 Saint Mary's College 3.000 06/01/2020 10.14 206
202 University of North Carolina 3.000 11/01/2005 8.81 192
280 University of North Carolina 3.000 01/01/2008 9.50 238
19 University of North Carolina 3.000 01/01/2007 9.50 17
---------- OHIO --------
51 Rio Grande College 3.000 03/30/2009 10.93 42
194 University of Steubenville 3.125 04/01/2010 10.98 151
570 Wittenberg University 3.000 05/01/2015 10.76 382
193 Wittenberg University 3.000 11/01/2017 10.39 125
See accompanying accountants' compilation report
and notes to financial statements.
26
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
-----------------------
May 31,2004
-----------
(Dollar Amounts in Thousands)
(continued)
Outstanding Stated Internal Amortized
Principal Interest Maturity Rate of Cost (Notes
Balance Description Rate % Date Return % (A) 1 and 2)
- ---------- ------------------------------------------------- ---------- ---------- ------------ -------------
$24 Wooster Business College 3.000 03/30/2009 10.88 $20
---------- OKLAHOMA --------
895 Cameron University 3.000 04/01/2007 10.16 779
400 Langston University 3.000 04/01/2007 10.56 345
40 Southern Nazarene University 3.750 04/01/2005 11.27 37
---------- OREGON --------
630 George Fox College 3.000 07/01/2018 10.64 395
67 Linfield College 3.000 10/01/2017 10.44 43
---------- PENNSYLVANIA --------
408 Albright College 3.000 11/01/2015 10.23 287
145 Carnegie-Mellon University 3.000 05/01/2009 10.73 117
795 Carnegie-Mellon University 3.000 11/01/2017 10.51 514
880 Drexel University 3.500 05/01/2014 10.53 635
490 Gannon University 3.000 11/01/2011 10.49 374
176 Gannon University 3.000 12/01/2022 10.13 101
175 Lycoming College 3.625 05/01/2014 10.64 126
245 Lycoming College 3.750 05/01/2015 10.62 173
162 Moravian College 3.375 11/01/2012 10.52 122
2,044 Philadelphia College of Art 3.000 01/01/2022 10.62 1,166
445 Saint Vincent College 3.500 05/01/2013 10.86 323
935 Villanova University 3.000 04/01/2019 10.70 565
292 York Hospital 3.000 05/01/2020 10.64 175
---------- RHODE ISLAND --------
70 Rhode Island College 3.000 10/01/2005 10.09 65
---------- SOUTH CAROLINA --------
22 Benedict College 3.750 11/01/2004 10.75 21
332 Benedict College 3.000 11/01/2006 10.61 300
1,532 Benedict College 3.000 11/01/2020 10.36 927
105 Clemson University 3.000 07/01/2005 9.51 98
85 Coker College 3.000 12/01/2009 10.04 67
44 Columbia College 3.625 07/01/2004 10.90 42
30 Columbia College 3.000 07/01/2006 10.80 27
368 Morris College 3.000 11/01/2009 10.53 299
---------- SOUTH DAKOTA --------
145 Dakota Wesleyan University 3.000 10/01/2015 10.46 99
---------- TENNESSEE --------
258 Cumberland University 3.000 08/01/2017 10.52 164
161 Hiwassee College 3.000 09/15/2018 10.58 101
---------- TEXAS --------
78 Cisco Junior College 3.000 07/01/2005 10.15 75
280 Houston Tillotson College 3.500 04/01/2014 10.90 197
225 McLennan Community College 3.000 04/01/2006 10.49 202
See accompanying accountants' compilation report
and notes to financial statements.
27
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
-----------------------
May 31,2004
-----------
(Dollar Amounts in Thousands)
(continued)
Outstanding Stated Internal Amortized
Principal Interest Maturity Rate of Cost (Notes
Balance Description Rate % Date Return % (A) 1 and 2)
- ---------- ------------------------------------------------- ---------- ---------- ------------ -------------
$268 Southern Methodist University 3.000 10/01/2007 10.61 $231
1,830 Southwest Texas State University 3.000 10/01/2015 9.51 1,302
1,397 Stephen F. Austin State University 3.375-3.500 10/01/2012 9.57 1,089
411 Texas A & I University 3.000 07/01/2009 9.57 340
350 Texas Southern University 3.500 04/01/2013 10.45 257
546 University of Saint Thomas 3.000 10/01/2019 10.41 336
---------- VERMONT --------
116 Champlain College 3.000 12/01/2013 10.19 82
1,361 Saint Michael's College 3.000 05/01/2013 10.60 990
260 Vermont State College 3.000 06/01/2008 9.02 223
196 Vermont State College 3.000 07/01/2014 9.30 143
---------- VIRGINIA --------
1,040 James Madison University 3.000 06/01/2009 10.49 836
368 Lynchburg College 3.750 05/01/2015 10.64 263
510 Lynchburg College 3.000 05/01/2018 10.68 320
273 Mary Baldwin College 3.375 05/01/2012 10.68 206
475 Marymount University 3.000 05/01/2016 10.52 315
2,411 Norfolk State University 3.000 12/01/2021 9.77 1,449
180 Randolph-Macon College 3.000 05/01/2010 10.72 144
377 Saint Paul's College 3.000 11/01/2014 10.56 268
1,772 Virginia Commonwealth University 3.000 06/01/2011 10.01 1,360
185 Virginia Commonwealth University 3.000 06/01/2004 10.08 176
195 Virginia Wesleyan College 3.000 11/01/2009 10.54 161
128 Virginia Wesleyan College 3.000 11/01/2010 10.51 101
---------- WASHINGTON --------
145 Olympic Community College 3.000 10/01/2008 10.07 126
282 Seattle University 3.000 11/01/2008 10.55 236
110 Western Washington University 3.625 10/01/2004 10.18 106
140 Western Washington University 3.750 10/01/2005 10.19 131
---------- WEST VIRGINIA --------
211 Bethany College 3.375 11/01/2012 10.54 161
230 Bethany College 3.000 11/01/2017 10.40 150
363 Bethany College 3.000 11/01/2012 10.40 269
40 Wheeling College 3.000 11/01/2007 10.59 35
---------- WISCONSIN --------
348 Carroll College 3.750 03/01/2015 10.93 248
435 Marian College 3.000 10/01/2016 10.45 290
144 Saint Norbert College 3.000 04/01/2007 11.10 124
See accompanying accountants' compilation report
and notes to financial statements.
28
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
----------------------------------------------
SCHEDULE OF INVESTMENTS
-----------------------
May 31,2004
-----------
(Dollar Amounts in Thousands)
(continued)
Outstanding Stated Internal Amortized
Principal Interest Maturity Rate of Cost (Notes
Balance Description Rate % Date Return % (A) 1 and 2)
- ---------- ------------------------------------------------- ---------- ---------- ------------ -------------
---------- DISTRICT OF COLUMBIA --------
$2,399 Georgetown University 3.000 11/01/2020 10.36 $1,452
6,205 Georgetown University 4.000 11/01/2020 10.52 4,016
209 Georgetown University 3.000 05/01/2005 10.86 197
---------- PUERTO RICO --------
55 Inter American University of Puerto Rico 3.000 09/01/2007 10.66 48
1,924 Inter American University of Puerto Rico 3.000 01/01/2017 10.94 1,236
1,209 University of Puerto Rico, Rio Piedras Campus 3.000 06/01/2011 9.39 948
- -------- --------
103,375 Total College and University Loans 73,223
- -------- --------
Allowance for Loan Losses 1,432
--------
Net Loans of the Trust 71,791
--------
INVESTMENT AGREEMENTS (16.6%)
1,949 JPMorgan Chase Bank - Liquidity Fund 7.750 06/01/2018 7.750 1,949
12,338 JPMorgan Chase Bank - Revenue Fund 7.050 06/01/2018 7.050 12,338
- -------- --------
14,287 Total Investment Agreements 14,287
- -------- --------
$117,662 Total Investments (100.0%) $86,078
======== ========
(A) Represents the rate of return based on the contributed cost and the
amortization to maturity.
See accompanying accountants' compilation report
and notes to financial statements.
29
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 at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable to the registrant.
ITEM 6. SCHEDULE OF INVESTMENTS
Schedule is included as part of the report to shareholders filed under Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable to the registrant.
ITEM 8. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable to the registrant.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable to the registrant.
ITEM 10. CONTROLS AND PROCEDURES
Not applicable to the registrant.
ITEM 11. EXHIBITS
The following exhibits are attached to this Form N-CSR:
(a)
(1) Code of ethics or amendments: not applicable to the registrant.
(2) Certification by the registrant's Owner Trustee, as required by
Rule 30a-2(a) under the Investment Company Act of 1940, is
attached.
(3) Written solicitation to purchase securities: not applicable to the
registrant.
(4) Annual Compliance Statement of the services GMAC Commercial
Mortgage Corporation, is attached.
(5) Attestation Report of Independent Accountants,
PricewaterhouseCoopers, LLP.
(6) GMAC reports pursuant to Section 1301, 1302, 1303, 1304, 1306, and
1307 of the servicer agreement.
(b) Certification by the registrant's Owner Trustee, as required by Rule
30a-2(b) under the Investment Company Act of 1940, is attached.
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: August 24, 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: August 24, 2004
-------------------------------------