N-CSRS
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)
Laura S
Cawley
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) 603-6452
Date of fiscal year end: November 30
Date of reporting period: December 1, 2013 – May 31, 2013
ITEM 1. REPORT TO STOCKHOLDERS
College and University Facility Loan Trust Two
Financial Statements (Unaudited)
As of and for the Six Months Ended May 31, 2014
College and University Facility Loan Trust Two
Contents
2
College and University Facility Loan Trust Two
Statement of Assets and Liabilities (Unaudited)
|
|
|
|
|
| May 31, |
|
2014 |
|
| Assets: |
|
|
|
|
| Investments, at amortized cost, net of allowance for loan losses of $126,000 (Notes 2, 6, 7, and 8) |
|
$ |
14,958,299 |
|
| Cash |
|
|
70,207 |
|
| Interest Receivable |
|
|
137,915 |
|
| Prepaid Assets |
|
|
13,750 |
|
| Deferred Bond Issuance Costs (Note 2) |
|
|
14,722 |
|
|
|
|
|
|
| Total Assets |
|
|
15,194,893 |
|
|
|
|
|
|
| Liabilities: |
|
|
|
|
| Bonds Payable, net of unamortized discount (Notes 3 and 8) |
|
|
8,570,297 |
|
| Bonds Interest Payable (Note 3) |
|
|
195,068 |
|
| Accrued Expenses and Other Liabilities |
|
|
126,454 |
|
| Distributions Payable to Class B Certificateholders (Note 5) |
|
|
204,860 |
|
|
|
|
|
|
| Total Liabilities |
|
|
9,096,679 |
|
|
|
|
|
|
| Net Assets: |
|
|
|
|
| Class B Certificates, par value $1; authorized, issued and outstanding – 1,763,800 certificates |
|
|
1,763,800 |
|
| Additional Paid-In Capital |
|
|
4,460,414 |
|
| Distributions in Excess of Net Investment Income |
|
|
(126,000 |
) |
|
|
|
|
|
| Net Assets |
|
$ |
6,098,214 |
|
|
|
|
|
|
| Net Asset Value per Class B Certificate (based on 1,763,800 certificates outstanding) |
|
$ |
3.46 |
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
3
College and University Facility Loan Trust Two
Statement of Operations (Unaudited)
|
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|
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| Six months ended May 31, |
|
2014 |
|
| Investment Income: |
|
|
|
|
| Interest income (Note 2) |
|
$ |
747,522 |
|
|
|
|
|
|
| Expenses: |
|
|
|
|
| Interest expense (Note 3) |
|
|
501,412 |
|
| Professional fees |
|
|
193,363 |
|
| Trustee fees (Note 4) |
|
|
15,427 |
|
| Servicer fees (Note 4) |
|
|
8,124 |
|
| Other trust and bond administration expenses |
|
|
4,756 |
|
|
|
|
|
|
| Total Expenses |
|
|
723,082 |
|
|
|
|
|
|
| Net Investment Income |
|
|
24,440 |
|
| Decrease in Allowance for Loan Losses (Note 6) |
|
|
10,000 |
|
|
|
|
|
|
| Net Increase in Net Assets Resulting From Operations |
|
$ |
34,440 |
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
4
College and University Facility Loan Trust Two
Statements of Changes in Net Assets
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| |
|
Six Months
Ended
May 31,
2014
(Unaudited) |
|
|
Year Ended
November 30,
2013 |
|
| Increase From Operations: |
|
|
|
|
|
|
|
|
| Net investment income |
|
$ |
24,440 |
|
|
$ |
370,866 |
|
| Decrease in allowance for loan losses |
|
|
10,000 |
|
|
|
64,000 |
|
|
|
|
|
|
|
|
|
|
| Net increase in net assets resulting from operations |
|
|
34,440 |
|
|
|
434,866 |
|
| Distributions to Class B Certificateholders From: |
|
|
|
|
|
|
|
|
| Tax return of capital (Note 2) |
|
|
(126,454 |
) |
|
|
(1,430,001 |
) |
|
|
|
|
|
|
|
|
|
| Net Decrease in Net Assets |
|
|
(92,014 |
) |
|
|
(995,135 |
) |
| Net Assets: |
|
|
|
|
|
|
|
|
| Beginning of period/year |
|
|
6,190,228 |
|
|
|
7,185,363 |
|
|
|
|
|
|
|
|
|
|
| End of period/year |
|
$ |
6,098,214 |
|
|
$ |
6,190,228 |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
5
College and University Facility Loan Trust Two
Statement of Cash Flows (Unaudited)
|
|
|
|
|
| Six months May 31, |
|
2014 |
|
| Cash Flows From Operating Activities: |
|
|
|
|
| Reconciliation of net increase in net assets resulting from operations to net cash provided by operating activities: |
|
|
|
|
| Net increase in net assets resulting from operations |
|
$ |
34,440 |
|
| Accretion of purchase discount on Loans |
|
|
(430,101 |
) |
| Amortization of original issue discount on Bonds |
|
|
302,386 |
|
| Amortization of deferred bond issuance costs |
|
|
3,957 |
|
| Decrease in allowance for loan losses |
|
|
(10,000 |
) |
| Receipts of payments on loan principal balance |
|
|
1,458,924 |
|
| Decrease in investment agreements, net |
|
|
1,965,066 |
|
| Increase in prepaid expenses |
|
|
(13,750 |
) |
| Decrease in interest receivable |
|
|
19,572 |
|
| Decrease in bonds interest payable |
|
|
(49,763 |
) |
| Decrease in accrued expenses and other liabilities |
|
|
(26,127 |
) |
|
|
|
|
|
| Net cash provided by operating activities |
|
|
3,254,604 |
|
|
|
|
|
|
| Cash Flows From Financing Activities: |
|
|
|
|
| Principal payments on Bonds |
|
|
(2,488,144 |
) |
| Distribution payments to Class B certificateholders |
|
|
(746,253 |
) |
|
|
|
|
|
| Net cash used in financing activities |
|
|
(3,234,397 |
) |
|
|
|
|
|
| Net Increase in Cash |
|
|
20,207 |
|
| Cash, beginning of period |
|
|
50,000 |
|
|
|
|
|
|
| Cash, end of period |
|
$ |
70,207 |
|
|
|
|
|
|
| Supplemental Cash Flow Information: |
|
|
|
|
| Cash paid for interest on Bonds |
|
$ |
244,831 |
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
6
College and University Facility Loan Trust Two
Financial Highlights
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| |
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Six Months
Ended
May 31,
2014
(Unaudited) |
|
|
Years Ended November 30, |
|
| |
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
| Per Certificate Operating Performance Information: |
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
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| Net asset value, beginning of period/year |
|
$ |
3.51 |
|
|
$ |
4.07 |
|
|
$ |
4.33 |
|
|
$ |
5.14 |
|
|
$ |
4.70 |
|
|
$ |
4.88 |
|
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| Income from investment operations: |
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
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|
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| Net investment income |
|
|
.01 |
|
|
|
.21 |
|
|
|
.49 |
|
|
|
.39 |
|
|
|
.53 |
|
|
|
.34 |
|
| Decrease in allowance for loan losses |
|
|
.01 |
|
|
|
.04 |
|
|
|
.09 |
|
|
|
.02 |
|
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|
.16 |
|
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|
.09 |
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| Net increase from operations |
|
|
.02 |
|
|
|
.25 |
|
|
|
.58 |
|
|
|
.41 |
|
|
|
.69 |
|
|
|
.43 |
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| Distributions to Class B certificateholders from tax return of capital |
|
|
(.07 |
) |
|
|
(.81 |
) |
|
|
(.84 |
) |
|
|
(1.22 |
) |
|
|
(.25 |
) |
|
|
(.61 |
) |
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| Net asset value, end of period/year(c) |
|
$ |
3.46 |
|
|
$ |
3.51 |
|
|
$ |
4.07 |
|
|
$ |
4.33 |
|
|
$ |
5.14 |
|
|
$ |
4.70 |
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| Total investment
return(a) |
|
|
N/A |
|
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|
N/A |
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|
N/A |
|
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|
N/A |
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N/A |
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N/A |
|
| Net assets applicable to Class B Certificates, End of period/year |
|
$ |
6,098,214 |
|
|
$ |
6,190,228 |
|
|
$ |
7,185,363 |
|
|
$ |
7,642,792 |
|
|
$ |
9,070,470 |
|
|
$ |
8,281,770 |
|
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| Ratios and Supplemental Data: |
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| Ratio of operating expenses to average net assets applicable to Class B Certificates |
|
|
11.74 |
%(b) (d) |
|
|
26.60 |
%(b) |
|
|
29.22 |
%(b) |
|
|
31.42 |
%(b) |
|
|
36.25 |
%(b) |
|
|
43.60 |
%(b) |
| Ratio of net investment income to average net assets applicable to Class B Certificates |
|
|
0.40 |
%(d) |
|
|
5.55 |
% |
|
|
11.59 |
% |
|
|
8.37 |
% |
|
|
10.96 |
% |
|
|
7.12 |
% |
| Number of Class B Certificates outstanding, end of period/year |
|
$ |
1,763,800 |
|
|
|
1,763,800 |
|
|
|
1,763,800 |
|
|
|
1,763,800 |
|
|
|
1,763,800 |
|
|
|
1,763,800 |
|
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| (a) |
The Trust’s investments are recorded at amortized cost as discussed in Note 2. Accordingly, the financial statements do not reflect the fair 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. The Trust is prohibited, by the terms of its Indenture, from selling or purchasing any investments. As the
Trust did not purchase or sell investments during the periods presented, “portfolio turnover” is 0% for all periods presented. |
| (b) |
Excluding interest expense, the ratio of operating expenses to average net assets was 3.60%(d), 8.44%, 6.82%, 5.30%, 5.07% and 5.72% in 2014, 2013, 2012, 2011, 2010
and 2009, respectively. |
| (c) |
The Trust is prohibited, by the terms of its Indenture, from issuing new, or redeeming existing, Certificates. As such, market value is not presented, as discussed in Note 2. |
The accompanying notes are an integral part of these financial statements.
7
College and University Facility Loan Trust Two
Notes to Financial Statements (Unaudited)
1. Organization and Business
College and University Facility Loan Trust Two (the “Trust”) was formed on March 11, 1988 as a business trust under the laws of the Commonwealth
of Massachusetts by a declaration of trust by Bank of Boston (the “Owner Trustee”), succeeded by State Street Bank and Trust Company, succeeded by U.S. Bank National Association (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, (the “1940 Act”) 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 loans made to college and university facilities (the “Loans”) and certain other 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 under the College Housing Loan Program or the Academic Facilities Loan Program. The Loans, which have been assigned to The Bank of New York Mellon Trust Company, National Association,
as successor in interest 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 18.8 years. Payments on the Loans are managed by the Bond Trustee in various fund accounts and are invested under investment agreements (see Note 2) as specified in the Indenture. The
Trust is prohibited, by the terms of its Indenture, from selling or purchasing any Loans and investments.
All payments on the Loans and earnings under
the investment agreements and any required transfers from the Expense Fund and Liquidity Fund are deposited to the credit of the Revenue Fund held by the Bond Trustee, as defined within and in accordance with the Indenture. In accordance with the
Indenture, on each bond payment date, the 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 up to the Expense Fund Requirement and to fund the Liquidity Fund to the Liquidity Fund up 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, as defined in the Indenture, after which any residual amounts are paid to the certificateholders, as discussed in Note 5. See Note 8 for balances in the Revenue and Liquidity Funds.
Berkadia Commercial Mortgage LLC (“Servicer” or “Berkadia”); formerly Capmark Finance, Inc., is the administrator for the Loan portfolio.
Berkadia serves as the Master Servicer and Special Servicer under the Master Servicing and Special Service Agreements. Berkadia handles the custodial bank accounts and performs the loan recordkeeping and monitoring.
8
College and University Facility Loan Trust Two
Notes to Financial Statements (Unaudited)
2. Summary of Significant Accounting Policies
(a) College and University Facility Loans
The
Loans were purchased by the Trust at amounts below the par value of the Loans, i.e. “purchase discount”.
As a 1940 Act investment company, the
Trust is required to report the investment portfolio of Loans at fair value under Accounting Standard Codification (“ASC”) Topic 946, Financial Services—Investment Companies, (“ASC 946”). However, management believes
that the amortized cost method of accounting, net of any allowance for loan losses, best serves the informational needs of the users of the Trust’s financial statements.
Pursuant to a “no-action letter” that the Trust received from the Securities and Exchange Commission, the Loans were recorded at the discounted
value (the amortized cost) and are being accounted for under the amortized cost method of accounting, net of any allowance for loan losses. Under the amortized cost method, the difference between the purchase discount and par value of each Loan is
accreted to par value, assuming no prepayments of principal, and included in the Trust’s interest income by applying the Loan’s effective interest rate to the amortized cost of that Loan over the duration of the Loan. Upon a Loan
prepayment, any remaining unamortized purchase discount is recognized as interest income. The remaining balance of the unamortized purchase discount on the Loans as of May 31, 2014 was approximately $2,937,000. For the six months ended
May 31, 2014, the Trust recognized approximately $430,000 of interest income from the accretion of purchase discount. As a result of prepayments of Loans during the six months ended May 31, 2014, approximately $3,000 from the remaining
unamortized purchase discount on such loans at the time of prepayment is included in the $430,000 of accretion for the six months ended May 31, 2014.
The Trust records an allowance for loan losses based on the Trust’s evaluation of collectability of the Loans within the portfolio. The Loans are
classified into three separate pools based on risk and collection performance. The pools are then assigned a reserve percentage based on risk and other factors and a reserve is systematically calculated for the pools:
| |
(1) |
General - Loans are performing on a timely basis and where there is no information that leads the Trust to reclassify to a different risk pool. |
| |
(2) |
Substandard - Loans are generally classified into this category resulting from either historical collection issues or administrative issues with receiving collection that have been on-going. Loans in this pool are not
considered uncollectible but due to collection issues, a higher reserve percentage is applied due to the risk profile of this pool. |
| |
(3) |
Doubtful - A Loan is considered doubtful when, based on current information and 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 in this category are generally assigned a 100% reserve unless facts and circumstances provide evidence that some level of collectability exists. At May 31, 2014, no loans were deemed doubtful by the Trust. |
As the credit quality for an individual Loan borrower changes, the Loan is evaluated for reclassification to a different risk pool as described above. Risk
ratings to the existing pools may be adjusted based on qualitative factors including, among others, general economic and business
9
College and University Facility Loan Trust Two
Notes to Financial Statements (Unaudited)
conditions, credit quality trends, and specific industry conditions. Berkadia, as part of its loan portfolio administration responsibilities, monitors credit quality primarily through two trigger
points: receipt of financial information that upon review raises credit quality concerns and delinquent payments which then require investigation as to causes of the delinquency. Historically, write-offs have not been material.
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 and such differences could be material.
(b) Interest Income
The Trust accrues interest, including accretion of purchase discount, on the Loans as earned. The Loans generally require interest payments on a semi-annual
basis with rates of interest ranging from 3% to 4%. The Trust recognizes the accretion of Loan purchase discount as interest income on the effective interest method.
The Trust views all amounts over 30 days past due as delinquent. It is the Trust’s policy to generally discontinue the accrual of interest on Loans for
which payment of principal or interest is 180 days or more past due or for other such Loans if management believes the collection of interest and principal is doubtful. Due to the nature of the Loan investments in the Trust, there are instances
where payment of the Loans and related interest may not be received by the Trust due to documentation issues that require time for the Trust to resolve. In those circumstances, where the past due loan is greater than 180 days but the Trust has
concluded it is not a credit issue, the Trust will continue to accrue interest or accrete purchase discount if the Trust believes interest and principal amounts to be collectible. When a Loan is placed on nonaccrual status, all previously accrued,
but uncollected interest is reversed against the current period’s interest income. Subsequently, any interest income received from a Loan that is on a nonaccrual status is recognized when received and such payments are generally applied to
interest first, with the balance, if any, applied to principal. At May 31, 2014, no Loans have been placed on nonaccrual status.
(c) 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 are carried at cost, whereas they should be reported at fair value under ASC 946. However, management believes that the cost
method of accounting best serves the informational needs of the users of the Trust’s financial statements because the Trust cannot sell or dispose of these investment agreements prior to the date they terminate, which is the earlier of
July 1, 2018, or the date on which the Bonds are paid-in-full. See Note 8 for discussion of fair value measurement of these investments.
(d)
Deferred Bond Issuance Costs
Deferred bond issuance costs are amortized using the effective interest rate method over the estimated life of the
Bonds, which are based on the scheduled payments of the Loans, and are included as a component of interest expense. Loan prepayments have the effect of accelerating Bond payments. As these accelerated Bond payments occur, an additional portion of
the deferred issuance costs is expensed in the year the prepayment occurs.
10
College and University Facility Loan Trust Two
Notes to Financial Statements (Unaudited)
(e) Federal Income Taxes
It is the Trust’s policy to comply with the requirements applicable to a regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended, and to distribute substantially all of its investment company taxable income to its certificateholders each year. Accordingly, no provision for federal income, state income, or excise tax is necessary.
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.
As of May 31, 2014, the Trust had no uncertain tax positions that would require financial statement recognition,
de-recognition, or disclosure. The Trust is additionally not aware of any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will change in the next 12 months.
The Trust files a U.S. federal and Massachusetts state income tax return annually after its fiscal year-end, which is subject to examination for a period of
three years from the date of filing.
Capital distributions are presented and disclosed in accordance with ASC 946, which requires the Trust to report
distributions that are in excess of tax-basis earnings and profits as a taxable return of capital and to present the Trust’s distributable earnings (components of net assets) on a basis that approximate the amounts that are available for future
distributions on a tax basis. Distributions of $0.07 per certificate were declared on May 30, 2014 and paid to certificateholders of record on June 2, 2014. The distributions of $126,454 and for the six months ended May 31, 2014
is a return of capital for tax purposes.
As of November 30, 2013, the Trust’s most recent tax year end, the primary permanent differences
between accounting principles generally accepted in the United States of America (“GAAP”) and tax basis are related to:
| |
(a) |
The accretion of the Loan purchase discounts under GAAP. For the years ended November 30, 2013 and 2012, the Trust recorded $1,321,867 and $1,969,368, respectively, of interest income related to the accretion of
purchase discounts. At November 30, 2013, the Trust had accumulated accretion of the purchase discounts of $215,333,177. |
| |
(b) |
Net operating losses for tax purposes of $1,235,106 for the year ended November 30, 2013. |
The primary
reasons for the book-to-tax temporary difference relate to allowance for loan losses and the difference in original issuance discount on bonds.
(f)
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates.
11
College and University Facility Loan Trust Two
Notes to Financial Statements (Unaudited)
(g) Statement of Cash Flows
The cash amount shown in the Statement of Cash Flows of the Trust is the amount included in the Trust’s Statement of Assets and Liabilities and represents
the cash at the bank and does not include any short-term investments.
(h) Risk Factors
The Trust’s investments are subject to the following:
Credit Risk
The Trust is subject to credit risk
from its counterparties to any of its investments if the counterparties fail to perform pursuant to the terms of their agreements with the Trust.
The
Trust’s investment agreements are held in escrow by the Bond Trustee. The Bond Trustee has custody of the Trust’s investment agreements. The Trust is subject to counterparty risk to the extent that the Bond Trustee may be unable to fulfill
its obligations to the Trust.
Loan payments made to the Trust are received and processed by the Servicer. The Trust is subject to counterparty risk to
the extent that the borrowers and the Servicer may be unable to fulfill their obligations to the Trust.
Prepayment Risk
Most of the Loans held by the Trust allow for prepayment of principal without penalty. As such, the Trust is subject to prepayment risk, which could negatively
impact future earnings.
(i) Indemnification
Under the Trust’s organizational documents, its Owner Trustee and Bond Trustee may be indemnified against certain liabilities and expenses arising out of
the performance of their duties to the Trust, and certificateholders are indemnified against personal liability for the obligations of the Trust. Additionally, in the normal course of business, the Trust may enter into agreements with service
providers that may contain indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred.
The remainder of this page intentionally left blank.
12
College and University Facility Loan Trust Two
Notes to Financial Statements (Unaudited)
3. Bonds
The Bonds outstanding at May 31, 2014 consist of the following:
|
|
|
|
|
|
|
|
|
| Interest
Rate |
|
Stated
Maturity |
|
Outstanding
Principal
(000’s) |
|
Unamortized
Discount
(000’s) |
|
Carrying
Amount
(000’s) |
| 4.0% |
|
June 1, 2018 |
|
$9,753 |
|
$(1,183) |
|
$8,570 |
Interest on the Bonds is payable semi-annually. On June 2, 2014, the Trust made a principal payment of $1,226,496 on the
Bonds. The average amount of bond principal outstanding for the six months ended May 31, 2014 was approximately $10,997,499.
Pursuant to the terms
of the Indenture, principal payments on the Bonds are made prior to the stated maturity 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.
The estimated remaining aggregate principal payments on the Bonds at
May 31, 2014, after taking into consideration actual Loan prepayments and the Maximum Principal Distribution Amount, are as follows:
|
|
|
|
|
| Fiscal Year |
|
Amount
(000’s) |
|
| 2014 |
|
$ |
2,793,731 |
|
| 2015 |
|
|
2,222,703 |
|
| 2016 |
|
|
2,188,462 |
|
| 2017 |
|
|
1,910,401 |
|
| 2018 |
|
|
638,130 |
|
|
|
|
|
|
| Total |
|
$ |
9,753,427 |
|
|
|
|
|
|
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 the Trust realizes negative cash
flows, the Liquidity Fund was established and is being maintained such that, on or before such bond 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. See Note 8 for balance in the Liquidity Fund.
The original issue discount is being amortized using the effective interest rate method over the
estimated life 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
13
College and University Facility Loan Trust Two
Notes to Financial Statements (Unaudited)
payments occur sooner than estimated, a portion of the original issue discount is expensed in the year of prepayment. Amortization of original issue discount is included as a component of
interest expense. Remaining unamortized discount as of May 31, 2014 was $1,183,131.
4. Administrative Agreements
(a) Servicer
As compensation for the services
provided under the servicing agreement, Berkadia, receives a servicing fee. The fee is earned on each date of payment for each Loan and is equal to 0.075 of 1% of the outstanding principal balance of such Loans divided by the number of payments of
principal and interest in a calendar year. For the six months ended May 31, 2014, this fee totaled $6,396. Additionally, per the servicing agreement, the Servicer is reimbursed for certain expenditures incurred related to inspection of
mortgaged property. For the six months ended May 31, 2014, the Servicer was reimbursed $270. As of May 31, 2014, $4,002 in fees are due to the Servicer.
(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:
Under the
Declaration of Trust agreement, the Owner Trustee, in its capacities as manager of the Trust and as Owner Trustee, is entitled to annual fees of $15,000 and $12,500, respectively. In addition, the Owner Trustee is paid an annual registration fee of
$1,000. The expected future minimum payments to the Owner Trustee under such agreement will be $28,500 in fiscal years 2014, 2015, 2016, 2017 and 2018, and will total $142,500 thereafter. For the six months ended May 31, 2014, the Owner Trustee
incurred no out-of-pocket expenses.
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 addition, the Bond Trustee is reimbursed for other agreed-upon related expenses such as
transaction costs. For the six months ended May 31, 2014, total Bond Trustee fees and related expenses amounted to $1,677.
5. Certificates
The holders of the Class B certificates may receive semi-annual distributions declared in May and November of each year, calculated in accordance with
the Indenture, from amounts collected by the Trust, on a pro rata basis. While the Bonds remain outstanding, the distributions are paid on the second business day in each June and December and, after the Bonds are paid in full, on the first
business day of each month. The certificate holders of the Class B Certificates are entitled to one vote per certificate. At May 31, 2014, the distributions declared on May 30, 2014 of $126,454, which was paid on June 2,
2014, was recorded as distributions payable.
14
College and University Facility Loan Trust Two
Notes to Financial Statements (Unaudited)
6. Allowance for Loan Losses
An analysis of the allowance for loan losses for the six months ended May 31, 2014 is summarized as follows:
|
|
|
|
|
| Balance, beginning of period |
|
$ |
136,000 |
|
| Decrease in allowance for loan losses |
|
|
(10,000 |
) |
| Charge-offs |
|
|
— |
|
| Recoveries |
|
|
— |
|
|
|
|
|
|
| Balance, end of period |
|
$ |
126,000 |
|
|
|
|
|
|
Loan classification by credit risk profile as of May 31, 2014 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Amortized
Cost
(000’s) |
|
|
Reserve
Amount
(000’s) |
|
|
Total
(000’s) |
|
| General |
|
$ |
12,564 |
|
|
$ |
(126 |
) |
|
$ |
12,438 |
|
| Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
12,564 |
|
|
$ |
(126 |
) |
|
$ |
12,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. Loans
Scheduled
principal and interest payments on the Loans as of May 31, 2014 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fiscal Year |
|
Principal
Payments
(000’s) |
|
|
Interest
Payments
(000’s) |
|
|
Total
(000’s) |
|
| 2014 |
|
$ |
1,857 |
|
|
$ |
249 |
|
|
$ |
2,106 |
|
| 2015 |
|
|
2,595 |
|
|
|
420 |
|
|
|
3,015 |
|
| 2016 |
|
|
2,551 |
|
|
|
339 |
|
|
|
2,890 |
|
| 2017 |
|
|
2,209 |
|
|
|
261 |
|
|
|
2,470 |
|
| 2018 |
|
|
1,953 |
|
|
|
192 |
|
|
|
2,145 |
|
| Thereafter |
|
|
4,336 |
|
|
|
260 |
|
|
|
4,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
15,501 |
|
|
$ |
1,721 |
|
|
$ |
17,222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected payments may differ from contractual payments because borrowers may prepay or default on their obligations.
Accordingly, actual principal and interest payments on the Loans may vary significantly from the scheduled payments. Prepayments made during the six months ended May 31, 2014 totaled $39,000.
The ability of a borrower to meet future 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
15
College and University Facility Loan Trust Two
Notes to Financial Statements (Unaudited)
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 diversity of program offerings.
At May 31, 2014, there were no delinquent principal balances.
The collateral for Loans that are secured by a mortgage on real estate generally consists of special purpose facilities, such as dormitories, dining halls and
gymnasiums, which are integral components of the overall educational setting. As a result, in the event of borrower default on a Loan, the Trust’s ability to realize the outstanding balance of the Loan through the sale of the underlying
collateral may be negatively impacted by the purpose, nature and location of such collateral.
8. Fair Value of Financial Instruments
ASC Topic 825, Financial Instruments requires entities to disclose the estimated fair value of financial instruments, where they are accounted for on a
basis other than fair value.
ASC Topic 820, Fair Value Measurement, establishes fair valuation principles and a hierarchy for inputs used in
measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in
valuing the asset or liability based on market data obtained from sources independent of the Trust. Unobservable inputs are inputs that reflect the Trust’s assumptions about the factors market participants would use in valuing the asset or
liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:
Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities.
Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
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 Loans and
Bonds 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 instruments 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 and Bonds, excluding any potential prepayments as it is not possible to estimate such prepayments.
16
College and University Facility Loan Trust Two
Notes to Financial Statements (Unaudited)
The fair values of the fixed-maturity investment agreements are determined by adding a market rate adjustment
to the carrying value of the investments. This market rate adjustment is calculated using the net present value of the difference between future interest income to the Trust at the issue rate and the future interest income at the current market rate
through the maturity of the investment. The current market rate at May 31, 2014, is based upon bonds with similar characteristics and maturity dates of the investment agreements.
The following table summarizes the estimated fair value and carrying value of the Trust’s assets and liabilities that represent financial instruments,
which all are deemed to be Level 2 fair value measurements as of May 31, 2014:
|
|
|
|
|
|
|
|
|
| |
|
Carrying
Value
(000’s) |
|
|
Fair
Value
(000’s) |
|
| Loans |
|
$ |
12,438 |
* |
|
$ |
15,592 |
|
| Investment Agreements: |
|
|
|
|
|
|
|
|
| Revenue Fund |
|
|
2,004 |
|
|
|
2,136 |
|
| Liquidity Fund |
|
|
516 |
|
|
|
590 |
|
|
|
|
|
|
|
|
|
|
| Total Investment Agreements |
|
|
2,520 |
|
|
|
2,726 |
|
|
|
|
|
|
|
|
|
|
| Total Investments |
|
$ |
14,958 |
|
|
$ |
18,357 |
|
|
|
|
|
|
|
|
|
|
| Bonds Payable |
|
$ |
8,570 |
|
|
$ |
10,300 |
|
|
|
|
|
|
|
|
|
|
| * |
Net of allowance for loan losses of $126,000. |
There were no transfers between levels during the period ended
May 31, 2014. The Trust’s policy is to recognize transfers in and transfers out as of the beginning of the period.
9. Subsequent Events
The Trust has evaluated the need for disclosures and/or adjustments to the financial statements resulting from subsequent events through the date of
issuance of these financial statements. Except for the subsequent distributions disclosed in Notes 3 and 5, the evaluation did not identify any subsequent events that necessitated disclosures and/or adjustments to these financial statements.
17
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
May 31, 2014
(Unaudited)
(Dollar Amounts in
Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
Principal
Balance |
|
|
Description |
|
Stated
Interest
Rate % |
|
|
Maturity
Date |
|
|
Effective
Yield to
Maturity %
(A) |
|
|
Amortized
Cost
(Notes
1 and 2) |
|
|
|
|
|
COLLEGE AND UNIVERSITY LOANS (206%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALABAMA (15%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ |
445 |
|
|
Alabama Agricultural and Mechanical University |
|
|
3.000 |
% |
|
|
05/01/2018 |
|
|
|
10.27 |
% |
|
$ |
381 |
|
| |
665 |
|
|
Auburn University |
|
|
3.000 |
|
|
|
12/01/2018 |
|
|
|
9.16 |
|
|
|
553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
934 |
|
|
|
|
|
CALIFORNIA (22%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
17 |
|
|
Azusa Pacific University |
|
|
3.750 |
|
|
|
04/01/2015 |
|
|
|
10.88 |
|
|
|
16 |
|
| |
938 |
|
|
California State University |
|
|
3.000 |
|
|
|
11/01/2019 |
|
|
|
8.99 |
|
|
|
793 |
|
| |
154 |
|
|
Lassen Junior College District |
|
|
3.000 |
|
|
|
04/01/2020 |
|
|
|
10.27 |
|
|
|
122 |
|
| |
480 |
|
|
University Student Co-Operative Association |
|
|
3.000 |
|
|
|
04/01/2019 |
|
|
|
10.70 |
|
|
|
387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,318 |
|
|
|
|
|
DISTRICT OF COLUMBIA (55%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
1,133 |
|
|
Georgetown University |
|
|
3.000 |
|
|
|
11/01/2020 |
|
|
|
10.36 |
|
|
|
897 |
|
| |
3,030 |
|
|
Georgetown University |
|
|
4.000 |
|
|
|
11/01/2020 |
|
|
|
10.52 |
|
|
|
2,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,366 |
|
|
|
|
|
FLORIDA (3%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
180 |
|
|
University of Florida |
|
|
3.000 |
|
|
|
07/01/2014 |
|
|
|
10.15 |
|
|
|
172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
172 |
|
|
|
|
|
GEORGIA (3%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
198 |
|
|
Paine College |
|
|
3.000 |
|
|
|
10/01/2016 |
|
|
|
10.45 |
|
|
|
177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
177 |
|
|
|
|
|
INDIANA (24%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
1,900 |
|
|
Vincennes University |
|
|
3.000 |
|
|
|
06/01/2023 |
|
|
|
9.02 |
|
|
|
1,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,440 |
|
|
|
|
|
IOWA (1%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
68 |
|
|
Simpson College |
|
|
3.000 |
|
|
|
07/01/2016 |
|
|
|
10.58 |
|
|
|
60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60 |
|
|
|
|
|
MARYLAND (2%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
15 |
|
|
Hood College |
|
|
3.625 |
|
|
|
11/01/2014 |
|
|
|
10.54 |
|
|
|
14 |
|
| |
91 |
|
|
Morgan State University |
|
|
3.000 |
|
|
|
11/01/2014 |
|
|
|
10.56 |
|
|
|
88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102 |
|
|
|
|
|
MISSISSIPPI (11%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
252 |
|
|
Millsaps College |
|
|
3.000 |
|
|
|
11/01/2021 |
|
|
|
10.34 |
|
|
|
194 |
|
| |
610 |
|
|
Mississippi State University |
|
|
3.000 |
|
|
|
12/01/2020 |
|
|
|
9.64 |
|
|
|
473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
667 |
|
|
|
|
|
NEW JERSEY (8%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
450 |
|
|
Fairleigh Dickinson University |
|
|
3.000 |
|
|
|
11/01/2017 |
|
|
|
10.39 |
|
|
|
391 |
|
| |
87 |
|
|
Rider College |
|
|
3.000 |
|
|
|
05/01/2017 |
|
|
|
10.70 |
|
|
|
75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
466 |
|
|
|
|
|
NEW Mexico (2%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
175 |
|
|
College of Santa Fe |
|
|
3.000 |
|
|
|
10/01/2018 |
|
|
|
10.43 |
|
|
|
149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
149 |
|
|
|
|
|
NEW YORK (2%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
90 |
|
|
Daemen College |
|
|
3.000 |
|
|
|
04/01/2016 |
|
|
|
10.77 |
|
|
|
80 |
|
| |
45 |
|
|
Long Island University |
|
|
3.625 |
|
|
|
06/01/2014 |
|
|
|
10.49 |
|
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123 |
|
|
|
|
|
NORTH CAROLINA (3%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
100 |
|
|
Elizabeth City State University |
|
|
3.000 |
|
|
|
10/01/2017 |
|
|
|
10.02 |
|
|
|
87 |
|
| |
153 |
|
|
Saint Mary’s College |
|
|
3.000 |
|
|
|
06/01/2020 |
|
|
|
10.14 |
|
|
|
121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
208 |
|
|
|
|
|
OHIO (2%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
60 |
|
|
Wittenberg University |
|
|
3.000 |
|
|
|
05/01/2015 |
|
|
|
10.76 |
|
|
|
56 |
|
| |
63 |
|
|
Wittenberg University |
|
|
3.000 |
|
|
|
11/01/2017 |
|
|
|
10.39 |
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111 |
|
The accompanying
notes are an integral part of this schedule.
18
COLLEGE AND UNIVERSITY FACILITY LOAN TRUST TWO
SCHEDULE OF INVESTMENTS
May 31, 2014
(Unaudited)
(Dollar Amounts in Thousands)
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
Principal
Balance |
|
|
Description |
|
Stated
Interest
Rate % |
|
|
Maturity
Date |
|
|
Effective
Yield to
Maturity %
(A) |
|
|
Amortized
Cost
(Notes
1 and 2) |
|
|
|
|
|
OREGON (3%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ |
217 |
|
|
George Fox College |
|
|
3.000 |
% |
|
|
07/01/2018 |
|
|
|
10.64 |
% |
|
$ |
183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
183 |
|
|
|
|
|
PENNSYLVANIA (18%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
25 |
|
|
Lycoming College |
|
|
3.750 |
|
|
|
05/01/2015 |
|
|
|
10.62 |
|
|
|
23 |
|
| |
1,044 |
|
|
Philadelphia College of Art |
|
|
3.000 |
|
|
|
01/01/2022 |
|
|
|
10.62 |
|
|
|
775 |
|
| |
28 |
|
|
Seton Hill College |
|
|
3.625 |
|
|
|
11/01/2014 |
|
|
|
10.53 |
|
|
|
27 |
|
| |
360 |
|
|
Villanova University |
|
|
3.000 |
|
|
|
04/01/2019 |
|
|
|
10.70 |
|
|
|
290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,115 |
|
|
|
|
|
PUERTO RICO (6%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
445 |
|
|
Inter American University of Puerto Rico |
|
|
3.000 |
|
|
|
01/01/2017 |
|
|
|
10.94 |
|
|
$ |
393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
393 |
|
|
|
|
|
TENNESSEE (1%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
58 |
|
|
Hiwassee College |
|
|
3.000 |
|
|
|
09/15/2018 |
|
|
|
10.58 |
|
|
|
48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48 |
|
|
|
|
|
TEXAS (3%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
235 |
|
|
University of Saint Thomas |
|
|
3.000 |
|
|
|
10/01/2019 |
|
|
|
10.41 |
|
|
|
191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
191 |
|
|
|
|
|
VIRGINIA (19%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
18 |
|
|
Lynchburg College |
|
|
3.750 |
|
|
|
05/01/2015 |
|
|
|
10.64 |
|
|
|
17 |
|
| |
155 |
|
|
Lynchburg College |
|
|
3.000 |
|
|
|
05/01/2018 |
|
|
|
10.68 |
|
|
|
130 |
|
| |
90 |
|
|
Marymount University |
|
|
3.000 |
|
|
|
05/01/2016 |
|
|
|
10.52 |
|
|
|
81 |
|
| |
1,232 |
|
|
Norfolk State University |
|
|
3.000 |
|
|
|
12/01/2021 |
|
|
|
9.77 |
|
|
|
940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,168 |
|
|
|
|
|
WEST VIRGINIA (1%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
80 |
|
|
Bethany College |
|
|
3.000 |
|
|
|
11/01/2017 |
|
|
|
10.40 |
|
|
|
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70 |
|
|
|
|
|
WISCONSIN (2%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
115 |
|
|
Marian College |
|
|
3.000 |
|
|
|
10/01/2016 |
|
|
|
10.45 |
|
|
|
103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(B) |
|
TOTAL COLLEGE & UNIVERSITY LOANS (206%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses (-2%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(126 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loans of the Trust (204%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT AGREEMENTS (41%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
516 |
|
|
JPMorgan Chase Bank - Revenue Fund |
|
|
7.050 |
|
|
|
06/01/2018 |
(C) |
|
|
7.050 |
|
|
|
516 |
|
| |
2,004 |
|
|
JPMorgan Chase Bank - Liquidity Fund |
|
|
7.750 |
|
|
|
06/01/2018 |
(C) |
|
|
7.750 |
|
|
|
2,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL INVESTMENT AGREEMENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL INVESTMENTS (245%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS, LESS LIABILITIES (-145%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,860 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS (100.0%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (A) |
Represents the rate of return earned by the Trust based on the purchase discount and the accretion to maturity. |
| (B) |
The tax basis of the Loans is approximately $18,021. |
| (C) |
Terminates at the earlier of July 1, 2018 or the date on which the Bonds are paid-in-full (Note 2). |
The accompanying notes are an integral part of this schedule.
19
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
(a) Audit
Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2013 - $223,050
Fiscal year ended 2012 - $192,000
(b)
Audit-Related Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2013 - $0
Fiscal year ended 2012 - $0
(c) Tax Fees billed
to the registrant for the two most recent fiscal years:
Fiscal year ended 2013 - $0
Fiscal year ended 2012 - $0
(d) All Other Fees
billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2013 - $60,176
-$43,576 in connection with Accountants’ Report on Applying Agreed-Upon Procedures to comply with the requirements of section 4.7
(c) of the Trust’s Indenture.
-$12,600 in connection with Accountants’ Report on Applying Agreed-Upon Procedures to
relating to the Trust’s Servicing Agreement.
-$4,000 out of pocket expenses.
Fiscal year ended 2012 - $57,500
-$41,500 in connection with Accountants’ Report on Applying Agreed-Upon Procedures to comply with the requirements of section 4.7
(c) of the Trust’s Indenture.
-$12,000 in connection with Accountants’ Report on Applying Agreed-Upon Procedures to
relating to the Trust’s Servicing Agreement.
-$4,000 out of pocket expenses.
(e)
(1) Audit Committee Policies regarding Pre-approval of Services.
Not applicable to the registrant.
(2) Percentage of services identified in items 4(b) through 4(d) that were approved by the registrants audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X:
Not applicable to the registrant.
(f) Not applicable to the registrant.
(g) Not applicable to the
registrant.
(h) Not applicable to the registrant.
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. PORTFOLIO
MANAGER OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable to the registrant.
ITEM 9. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS
Not applicable to the registrant.
ITEM 10. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable to the registrant.
ITEM 11. CONTROLS AND PROCEDURES
(a) Not applicable to the
registrant.
(b) Not applicable to the registrant.
ITEM 12. 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) |
Annual Compliance Statement of the Servicer, Berkadia Commercial Mortgage LLC, is attached. |
| |
(4) |
Report on Compliance with minimum Master Servicing Standards is attached. |
| |
(5) |
Berkadia Commercial Mortgage LLC 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 (Signature and Title) /s/ Laura S Cawley, Vice President
Date June 24, 2014
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 (Signature and Title) /s/ Bryan Calder, Executive Vice President
Date June 25, 2014
