UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For The Quarterly Period Ended December 31, 2003
Commission File Number 0-19022
Gateway Tax Credit Fund II Ltd.
(Exact name of Registrant as specified in its charter)
Florida 65-0142704
(State or other jurisdiction of (I.R.S. Employer No.)
incorporation or organization)
880 Carillon Parkway, St. Petersburg, Florida 33716
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (727)567-4830
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
Number of Units
Title of Each Class December 31,2003
Beneficial Assignee Certificates:
$1,000 per certificate 37,228
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II, 2003 Form 10-K, filed with the
Securities and Exchange Commission on June 27, 2003
Parts III and IV - Form S-11 Registration Statement
and all amendments and supplements thereto
File No. 33-31821
PART I - Financial Information
Item 1. Financial Statements
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
|
SERIES 2 |
December 31, |
March 31, |
|
ASSETS |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
|
SERIES 3 |
December 31, |
March 31, |
|
ASSETS |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
|
SERIES 4 |
December 31, |
March 31, |
|
ASSETS |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
|
SERIES 5 |
December 31, |
March 31, |
|
ASSETS |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
|
SERIES 6 |
December 31, |
March 31, |
|
ASSETS Investments in Securities Investments in Project Partnerships, Net Total Assets LIABILITIES AND PARTNERS' EQUITY Current Liabilities: Payable to General Partners Total Current Liabilities Long-Term Liabilities: Payable to General Partners Partners' Equity (deficit): Assignor Limited Partner Units of limited partnership interest consisting of 40,000 authorized BAC's, of which 10,105 at December 31, 2003 and March 31, 2003 have been issued to the assignees Assignees Units of beneficial interest of the limited partnership interest of the assignor limited partner, $1,000 stated value per BAC, 10,105 at December 31, 2003 and March 31, 2003, issued and outstanding General Partners Total Partners' Equity Total Liabilities and Partners' Equity |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
|
TOTAL SERIES 2 - 6 |
December 31, |
March 31, |
|
ASSETS |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31,
(Unaudited)
|
SERIES 2 |
2003 |
2002 |
|
Revenues: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31,
(Unaudited)
|
SERIES 3 |
2003 |
2002 |
|
Revenues: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31,
(Unaudited)
|
SERIES 4 |
2003 |
2002 |
|
Revenues: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31,
(Unaudited)
|
SERIES 5 |
2003 |
2002 |
|
Revenues: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31,
(Unaudited)
|
SERIES 6 |
2003 |
2002 |
|
Revenues: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31,
(Unaudited)
|
TOTAL SERIES 2 - 6 |
2003 |
2002 |
|
Revenues: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31,
(Unaudited)
|
SERIES 2 |
2003 |
2002 |
|
Revenues: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31,
(Unaudited)
|
SERIES 3 |
2003 |
2002 |
|
Revenues: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31,
(Unaudited)
|
SERIES 4 |
2003 |
2002 |
|
Revenues: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31,
(Unaudited)
|
SERIES 5 |
2003 |
2002 |
|
Revenues: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31,
(Unaudited)
|
SERIES 6 |
2003 |
2002 |
|
Revenues: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31,
(Unaudited)
|
TOTAL SERIES 2 - 6 |
2003 |
2002 |
|
Revenues: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (Deficit)
FOR THE NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(Unaudited)
|
|
|
General |
|
|
|
|
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (Deficit)
FOR THE NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(Unaudited)
|
|
|
General |
|
|
|
|
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (Deficit)
FOR THE NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(Unaudited)
|
|
|
General |
|
|
|
|
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (Deficit)
FOR THE NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(Unaudited)
|
|
|
General |
|
|
|
|
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (Deficit)
FOR THE NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(Unaudited)
|
|
|
General |
|
|
|
|
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (Deficit)
FOR THE NINE MONTHS ENDED DECEMBER 30, 2003 AND 2002
(Unaudited)
|
|
|
General |
|
|
|
|
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(Unaudited)
|
SERIES 2 |
2003 |
2002 |
|
Cash Flows from Operating Activities: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(Unaudited)
|
SERIES 3 |
2003 |
2002 |
|
Cash Flows from Operating Activities: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(Unaudited)
|
SERIES 4 |
2003 |
2002 |
|
Cash Flows from Operating Activities: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(Unaudited)
|
SERIES 5 |
2003 |
2002 |
|
Cash Flows from Operating Activities: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(Unaudited)
|
SERIES 6 |
2003 |
2002 |
|
Cash Flows from Operating Activities: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(Unaudited)
|
TOTAL SERIES 2 - 6 |
2003 |
2002 |
|
Cash Flows from Operating Activities: |
|
|
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND II LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
DECEMBER 31, 2003
NOTE 1 - ORGANIZATION:
Gateway Tax Credit Fund II Ltd. ("Gateway"), a Florida Limited Partnership, was formed September 12, 1989, under the laws of Florida. Operations commenced on September 14, 1990 for Series 2, September 28, 1990 for Series 3, February 1, 1991 for Series 4, July 1, 1991 for Series 5 and January 1, 1992 for Series 6. Gateway has invested, as a limited partner, in other limited partnerships ("Project Partnerships") each of which owns and operates one or more apartment complexes expected to qualify for Low-Income Housing Tax Credits. Gateway will terminate on December 31, 2040, or sooner, in accordance with the terms of the Limited Partnership Agreement. As of December 31, 2003, Gateway had received capital contributions of $1,000 from the General Partners and $37,228,000 from Beneficial Assignee Certificate investors (the "Assignees"). The fiscal year of Gateway for reporting purposes ends on March 31.
Pursuant to the Securities Act of 1933, Gateway filed a Form S-11 Registration Statement with the Securities and Exchange Commission, effective September 12, 1989, which covered the offering (the "Public Offering") of Gateway's Beneficial Assignee Certificates ("BACs") representing assignments of units for the beneficial interest of the limited partnership interest of the Assignor Limited Partner. The Assignor Limited Partner was formed for the purpose of serving in that capacity for the Fund and will not engage in any other business.
Raymond James Partners, Inc. and Raymond James Tax Credit Funds, Inc., wholly-owned subsidiaries of Raymond James Financial, Inc., are the General Partner and the Managing General Partner, respectively. The Managing General Partner manages and controls the business of Gateway.
Gateway offered BACs in five series. BACs in the amounts of $6,136,000, $5,456,000, $6,915,000, $8,616,000 and $10,105,000 for Series 2, 3, 4, 5 and 6, respectively had been issued as of December 31, 2003. Each Series is treated as a separate partnership, investing in a separate and distinct pool of Project Partnerships. Net proceeds from each Series are used to acquire Project Partnerships which are specifically allocated to such Series. Income or loss and all tax items from the Project Partnerships acquired by each Series are specifically allocated among the Assignees of such Series.
Operating profits and losses, cash distributions from operations and tax credits are allocated 99% to the Assignees and 1% to the General Partners. Profit or loss and cash distributions from sales of properties will be allocated as formulated in the Limited Partnership Agreement.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting
Gateway utilizes the accrual basis of accounting whereby revenues are recognized when earned and expenses are recognized when obligations are incurred.
Gateway accounts for its investments as the sole limited partner in Project Partnerships ("Investments in Project Partnerships") using the equity method of accounting, because management believes that Gateway does not have a majority control of the major operating and financial policies of the Project Partnerships in which it invests, and reports the equity in losses of the Project Partnerships on a 3-month lag in the Statements of Operations. Under the equity method, the Investments in Project Partnerships initially include:
1) Gateway's capital contribution,
2) Acquisition fees paid to the General Partner for services rendered in selecting properties for acquisition, and
3) Acquisition expenses including legal fees, travel and other miscellaneous costs relating to acquiring properties.
Quarterly the Investments in Project Partnerships are increased or decreased as follows:
1) Increased for equity in income or decreased for equity in losses of the
Project Partnerships,
2) Decreased for cash distributions received from the Project Partnerships, and
3) Decreased for the amortization of the acquisition fees and expenses.
Amortization is calculated on a straight-line basis over 35 years, as this is the average estimated useful life of the underlying assets. The amortization is shown as amortization expense on the Statements of Operations.
Pursuant to the limited partnership agreements for the Project Partnerships, cash losses generated by the Project Partnerships are allocated to the general partners of those partnerships. In subsequent years, cash profits, if any, are first allocated to the general partners to the extent of the allocation of prior years' cash losses.
Since Gateway invests as a limited partner, and therefore is not obligated to fund losses or make additional capital contributions, it does not recognize losses from individual Project Partnerships to the extent that these losses would reduce the investment in those Project Partnerships below zero. The suspended losses will be used to offset future income from the individual Project Partnerships.
Gateway reviews its investment in the Project Partnerships to determine if there has been any permanent impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable. If the sum of the expected future cash flows is less than the carrying amount of the investment, Gateway recognizes an impairment loss. No impairment loss has been recognized in the accompanying financial statements.
Gateway, as a limited partner in the Project Partnerships, is subject to risks inherent in the ownership of property which are beyond its control, such as fluctuations in occupancy rates and operating expenses, variations in rental schedules, proper maintenance and continued eligibility of tax credits. If the cost of operating a property exceeds the rental income earned thereon, Gateway may deem it in its best interest to voluntarily provide funds in order to protect its investment.
Cash and Cash Equivalents
It is Gateway's policy to include short-term investments with an original maturity of three months or less in Cash and Cash Equivalents. Short-term investments are comprised of money market mutual funds.
Concentration of Credit Risk
Financial instruments which potentially subject Gateway to concentrations of credit risk consist of cash investments in a money market mutual fund that is a wholly-owned subsidiary of Raymond James Financial, Inc.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates that affect certain reported amounts and disclosures. These estimates are based on management's knowledge and experience. Accordingly, actual results could differ from these estimates.
Investment in Securities
Effective April 1, 1995, Gateway adopted Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities ("FAS 115"). Under FAS 115, Gateway is required to categorize its debt securities as held-to-maturity, available-for-sale or trading securities, dependent upon Gateway's intent in holding the securities. Gateway's intent is to hold all of its debt securities (U. S. Government Security Strips) until maturity and to use these reserves to fund Gateway's ongoing operations. Interest income is recognized ratably on the U. S. Government Strips using the effective yield to maturity.
Income Taxes
No provision for income taxes has been made in these financial statements, as income taxes are a liability of the partners rather than of Gateway.
Reclassifications
For comparability, the 2002 figures have been reclassified, where appropriate, to conform with the financial statement presentation used in 2003.
Basis of Preparation
The unaudited financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the financial statements and notes thereto included with the Partnership's Form 10-K for the year ended March 31, 2003. In the opinion of management these financial statements include adjustments, consisting only of normal recurring adjustments, necessary to fairly summarize the Partnership's financial position and results of operations. The results of operations for the periods may not be indicative of the results to be expected for the year.
Recent Accounting Pronouncements
In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No 144 provides accounting guidance for financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The Partnership adopted SFAS No. 144 effective January 1, 2002. The adoption did not have an effect on the financial position or results of operations of the Partnership.
In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN46"), "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51." FIN46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN46 is effective for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN46 must be applied for the first interim or annual period ending after December 15, 2003. The Partnership is currently evaluating the effect, if any, that the adoption of FIN46 will have on its results of operations and financial condition.
NOTE 3 - INVESTMENT IN SECURITIES:
The December 31, 2003 Balance Sheet includes Investment in Securities consisting of U.S. Government Security Strips which represents their cost, plus accreted interest income of $105,405 for Series 2, $93,755 for Series 3, $118,778 for Series 4, $148,043 for Series 5 and $153,693 for Series 6. For convenience, the Investment in Securities are commonly held in a brokerage account with Raymond James and Associates, Inc. A separate accounting is maintained for each series' share of the investments.
|
Estimated Market |
Cost Plus Accreted |
Gross Unrealized |
|
|
Series 2 |
$ 186,536 |
$ 173,496 |
$ 13,040 |
|
Series 3 |
165,867 |
154,321 |
11,546 |
|
Series 4 |
210,219 |
195,509 |
14,710 |
|
Series 5 |
261,930 |
243,678 |
18,252 |
|
Series 6 |
296,417 |
274,111 |
22,306 |
As of December 31, 2003, the cost and accreted interest of debt securities by contractual maturities is as follows:
|
Series 2 |
Series 3 |
Series 4 |
|
|
Due within 1 year |
$ 60,174 |
$ 53,523 |
$ 67,808 |
|
After 1 year through 5 years |
113,322 |
100,798 |
127,701 |
|
After 5 years through 10 years |
0 |
0 |
0 |
|
Total Amount Carried on |
|
|
|
|
Series 5 |
Series 6 |
Total |
|
|
Due within 1 year |
$ 84,515 |
$ 69,913 |
$ 335,933 |
|
After 1 year through 5 years |
159,163 |
137,860 |
638,844 |
|
After 5 years through 10 years |
0 |
66,338 |
66,338 |
|
Total Amount Carried on |
|
|
|
NOTE 4 - RELATED PARTY TRANSACTIONS:
Asset Management Fee - The Managing General Partner is entitled to be paid an annual asset management fee equal to 0.25% of the aggregate cost of Gateway's interest in the projects owned by the Project Partnerships. The asset management fee will be paid only after all other expenses of Gateway have been paid. These fees are included in the Statements of Operations.
2003 2002
------- ------
Series 2 $ 51,014 $ 51,150
Series 3 46,994 47,178
Series 4 57,954 58,107
Series 5 71,610 71,817
Series 6 79,032 79,314
--------- ---------
Total $ 306,604 $ 307,566
========= =========
General and Administrative Expenses - The Managing General Partner is reimbursed for general and administrative expenses of Gateway on an accountable basis. This expense is included in the Statements of Operations.
Series 2 $ 25,206 $ 14,845
Series 3 26,352 15,520
Series 4 33,225 19,569
Series 5 41,246 24,292
Series 6 43,537 25,642
--------- -------
Total $ 169,566 $ 99,868
========= =========
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS:
As of December 31, 2003, the Partnership had acquired a 99% interest in the profits, losses and tax credits as a limited partner in 148 Project Partnerships for the Series which own and operate government assisted multi-family housing complexes (Series 2 - 22,Series 3 - 23, Series 4 - 29, Series 5 - 36 and Series 6 - 38).
Cash flows from operations are allocated according to each partnership agreement. Upon dissolution proceeds will be distributed according to each partnership agreement.
The following is a summary of Investments in Project Partnerships as of:
|
SERIES 2 |
DECEMBER 31, |
MARCH 31, |
|
Capital Contributions to Project Partner- |
|
|
(1) In accordance with the Partnership's accounting policy to not carry Investments in Project Partnerships below zero, cumulative suspended losses of $4,063,633 for the period ended December 31, 2003 and cumulative suspended losses of $3,619,969,for the year ended March 31, 2003 are not included.
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (continued):
The following is a summary of Investments in Project Partnerships as of:
|
SERIES 3 |
DECEMBER 31, |
MARCH 31, |
|
Capital Contributions to Project Partner- |
|
|
(1) In accordance with the Partnership's accounting policy to not carry Investments in Project Partnerships below zero, cumulative suspended losses of $4,838,733 for the period ended December 31, 2003 and cumulative suspended losses of $4,423,589 for the year ended March 31, 2003 are not included.
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (continued):
The following is a summary of Investments in Project Partnerships as of:
|
SERIES 4 |
DECEMBER 31, |
MARCH 31, |
|
Capital Contributions to Project Partner- |
|
|
(1) In accordance with the Partnership's accounting policy to not carry Investments in Project Partnerships below zero, cumulative suspended losses of $3,794,356 for the period ended December 31, 2003 and cumulative suspended losses of $3,390,030 for the year ended March 31, 2003 are not included.
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (continued):
The following is a summary of Investments in Project Partnerships as of:
|
SERIES 5 |
DECEMBER 31, |
MARCH 31, |
|
Capital Contributions to Project Partner- |
|
|
(1) In accordance with the Partnership's accounting policy to not carry Investments in Project Partnerships below zero, cumulative suspended losses of $4,546,623 for the period ended December 31, 2003 and cumulative suspended losses of $4,001,897 for the year ended March 31, 2003 are not included.
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (continued):
The following is a summary of Investments in Project Partnerships as of:
|
SERIES 6 |
DECEMBER 31, |
MARCH 31, |
|
Capital Contributions to Project Partner- |
|
|
(1) In accordance with the Partnership's accounting policy to not carry Investments in Project Partnerships below zero, cumulative suspended losses of $3,117,155 for the period ended December 31, 2003 and cumulative suspended losses of $2,752,730 for the year ended March 31, 2003 are not included.
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (continued):
The following is a summary of Investments in Project Partnerships as of:
|
TOTAL SERIES 2 - 6 |
DECEMBER 31, |
MARCH 31, |
|
Capital Contributions to Project Partner- |
|
|
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (continued):
In accordance with the Partnership's policy of presenting the financial information of the Project Partnerships on a three month lag, below is the summarized financial information for the Series' Project Partnerships as of September 30, of each year:
|
SEPTEMBER 30, |
||
|
SERIES 2 |
2003 |
2002 |
|
SUMMARIZED BALANCE SHEETS |
|
|
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (continued):
In accordance with the Partnership's policy of presenting the financial information of the Project Partnerships on a three month lag, below is the summarized financial information for the Series' Project Partnerships as of September 30, of each year:
|
SEPTEMBER 30, |
||
|
SERIES 3 |
2003 |
2002 |
|
SUMMARIZED BALANCE SHEETS |
|
|
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (continued):
In accordance with the Partnership's policy of presenting the financial information of the Project Partnerships on a three month lag, below is the summarized financial information for the Series' Project Partnerships as of September 30, of each year:
|
SEPTEMBER 30, |
|||
|
SERIES 4 |
2003 |
2002 |
|
|
SUMMARIZED BALANCE SHEETS |
|
|
|
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (continued):
In accordance with the Partnership's policy of presenting the financial information of the Project Partnerships on a three month lag, below is the summarized financial information for the Series' Project Partnerships as of September 30, of each year:
|
SEPTEMBER 30, |
||
|
SERIES 5 |
2003 |
2002 |
|
SUMMARIZED BALANCE SHEETS |
|
|
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (continued):
In accordance with the Partnership's policy of presenting the financial information of the Project Partnerships on a three month lag, below is the summarized financial information for the Series' Project Partnerships as of September 30, of each year:
|
SEPTEMBER 30, |
||
|
SERIES 6 |
2003 |
2002 |
|
SUMMARIZED BALANCE SHEETS |
35,666,734 - ----------- (2,875,287) (387,447) - ----------- (3,262,734) - ----------- $32,404,000 =========== $ 3,291,025 - ----------- 2,189,626 616,293 1,010,894 - ----------- 3,816,813 - ----------- $ (525,788) =========== $ (5,868) =========== $ (519,920) 364,425 - ----------- $ (155,495) =========== |
35,728,891 - ----------- (2,049,519) (346,218) - ----------- (2,395,737) - ----------- $33,333,154 =========== $ 3,175,617 - ----------- 2,072,384 624,538 1,010,894 - ----------- 3,707,816 - ----------- $ (532,199) =========== $ (6,591) =========== $ (525,608) 377,896 - ----------- $ (147,712) =========== |
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (continued):
In accordance with the Partnership's policy of presenting the financial information of the Project Partnerships on a three month lag, below is the summarized financial information for the Series' Project Partnerships as of September 30, of each year:
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SEPTEMBER 30, |
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2003 |
2002 |
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SUMMARIZED BALANCE SHEETS |
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Item 4. Controls and Procedures:
Within 90 days prior to the filing of this report, under the supervision and with the participation of the Partnership's management, including the Partnership's chief executive and chief financial officers, an evaluation of the effectiveness of the Partnership's disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934) was performed. Based on this evaluation, such officers have concluded that the Partnership's disclosure controls and procedures were effective as of the date of that evaluation in alerting them in a timely manner to material information relating to the Partnership required to be included in this report and the Partnership's other reports that it files or submits under the Securities Exchange Act of 1934. There were no significant changes in the Partnership's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations, Liquidity and Capital Resources
Operations commenced on September 14, 1990, with the first admission of Assignees in Series 2. The proceeds from Assignees' capital contributions available for investment were used to acquire interests in Project Partnerships.
As disclosed on the statement of operations for each Series, interest income is comparable for the nine and three months ended December 31, 2003 and December 31, 2002. The General and Administrative expenses - General Partner for the nine months ended December 31, 2003 are higher for the same period ended December 31, 2002. This increase was due to higher administrative costs. Other income increased to $5,750 for Series 2, $16,317 for Series 3, $26,141 for Series 4, $13,242 for Series 5, and $11,502 for Series 6 for the nine months ended December 31, 2003. These amounts consisted of distributions from Project Partnerships that were in excess of Gateway's investment in the partnerships. There were no unusual variations in the operating results between these two periods.
The capital resources of each Series are used to pay General and Administrative operating costs including personnel, supplies, data processing, travel and legal and accounting associated with the administration and monitoring of Gateway and the Project Partnerships. The capital resources are also used to pay the Asset Management Fee due the Managing General Partner, but only to the extent that Gateway's remaining resources are sufficient to fund Gateway's ongoing needs. (Payment of any Asset Management Fee unpaid at the time Gateway sells its interests in the Project Partnerships is subordinated to the return of the investors' original capital contributions).
The sources of funds to pay the operating costs of each Series are short term investments and interest earned thereon, the maturity of U.S. Treasury Security Strips ("Zero Coupon Treasuries") which were purchased with funds set aside for this purpose, and cash distributed to the Series from the operations of the Project Partnerships.
From inception, no Series has paid distributions and management does not anticipate distributions in the future.
Series 2 - Gateway closed this series on September 14, 1990 after receiving $6,136,000 from 375 Assignees. Equity in Losses of Project Partnerships for the nine months ended December 31, 2003 decreased from $65,536 for the nine months ended December 31, 2002 to $24,498 as a result of an increase in suspended losses. In general, it is common in the real estate industry to experience losses for financial and tax reporting purposes because of the non-cash expenses of depreciation and amortization. As a result, management expects that this Series, as well as those described below, will report its equity in Project Partnerships as a loss for tax and financial reporting purposes. Overall, management believes the Project Partnerships are operating as expected and are generating tax credits which meet projections.
At December 31, 2003, the Series had $229,296 of short-term investments (Cash and Cash Equivalents). It also had $173,496 in Zero Coupon Treasuries with annual maturities providing $61,308 in fiscal year 2004 increasing to $66,285 in fiscal year 2007. Management believes the sources of funds are sufficient to meet current and ongoing operating costs for the foreseeable future, and to pay part of the Asset Management Fee.
As disclosed on the statement of cash flows, the Series had a net loss of $91,088 for the nine months ended December 31, 2003. However, after adjusting for Equity in Losses of Project Partnerships of $24,498 and the changes in operating assets and liabilities, net cash used in operating activities was $45,862. Cash provided by investing activities totaled $32,003, consisting of $7,350 in cash distributions from the Project Partnerships and $24,653 from matured Zero Coupon Treasuries. There were no unusual events or trends to describe.
Series 3 - Gateway closed this series on December 13, 1990 after receiving $5,456,000 from 398 Assignees. Equity in Losses of Project Partnerships for the nine months ended December 31, 2003 decreased from $10,898 for the nine months ended December 31, 2002 to $4,682 as a result of an increase in suspended losses.
At December 31, 2003, the Series had $199,889 of short-term investments (Cash and Cash Equivalents). It also had $154,321 in Zero Coupon Treasuries with annual maturities providing $54,514 in fiscal year 2004, increasing to $58,940 in fiscal year 2007. Management believes the sources of funds are sufficient to meet current and ongoing operating costs for the foreseeable future, and to pay part of the Asset Management Fee.
As disclosed on the statement of cash flows, the Series had a net loss of $59,181 for the nine months ended December 31, 2003. However, after adjusting for Equity in Losses of Project Partnerships of $4,682 and the changes in operating assets and liabilities, net cash used in operating activities was $39,806. Cash provided by investing activities totaled $38,245, consisting of $16,317 in cash distributions from the Project Partnerships and $21,928 from matured Zero Coupon Treasuries. There were no unusual events or trends to describe.
Series 4 - Gateway closed this series on May 31, 1991 after receiving $6,915,000 from 465 Assignees. Equity in Losses of Project Partnerships for the nine months ended December 31, 2003 decreased from $72,547 for the nine months ended December 31, 2002 to $11,354 as a result of an increase in suspended losses.
At December 31, 2003, the Series had $291,186 of short-term investments (Cash and Cash Equivalents). It also had $195,509 in Zero Coupon Treasuries with annual maturities providing $69,091 in fiscal year 2004 increasing to $74,700 in fiscal year 2007. Management believes the sources of funds are sufficient to meet current and ongoing operating costs for the foreseeable future, and to pay part of the Asset Management Fee.
As disclosed on the statement of cash flows, the Series had a net loss of $73,682 for the nine months ended December 31, 2003. However, after adjusting for Equity in Losses of Project Partnerships of $11,354 and the changes in operating assets and liabilities, net cash used in operating activities was $36,631. Cash provided by investing activities totaled $53,921, consisting of $26,140 in cash distributions from the Project Partnerships and $27,781 from matured Zero Coupon Treasuries. There were no unusual events or trends to describe.
Series 5 - Gateway closed this series on October 11, 1991 after receiving $8,616,000 from 535 Assignees. Equity in Losses of Project Partnerships for the nine months ended December 31, 2003 increased from $89,126 for the nine months ended December 31, 2002 to $96,938 as a result of an increase in rental expenses.
At December 31, 2003, the Series had $369,407 of short-term investments (Cash and Cash Equivalents). It also had $243,678 in Zero Coupon Treasuries with annual maturities providing $86,087 in fiscal year 2004 increasing to $93,075 in fiscal year 2007. Management believes the sources of funds are sufficient to meet current and ongoing operating costs for the foreseeable future, and to pay part of the Asset Management Fee.
As disclosed on the statement of cash flows, the Series had a net loss of $195,492 for the nine months ended December 31, 2003. However, after adjusting for Equity in Losses of Project Partnerships of $96,938 and the changes in operating assets and liabilities, net cash used in operating activities was $68,124. Cash provided by investing activities totaled $52,129, consisting of $17,505 in cash distributions from the Project Partnerships and $34,624 from matured Zero Coupon Treasuries. There were no unusual events or trends to describe.
Series 6 - Gateway closed this series on March 11, 1992 after receiving $10,105,000 from 625 Assignees. Equity in Losses of Project Partnerships for the nine months ended December 31, 2003 increased from $147,712 for the nine months ended December 31, 2002 to $155,495 as a result of a decrease in suspended losses.
At December 31, 2003, the Series had $344,486 of short-term investments (Cash and Cash Equivalents). It also had $274,111 in Zero Coupon Treasuries with annual maturities providing $70,000 in fiscal year 2004 increasing to $83,000 in fiscal year 2007. Management believes the sources of funds are sufficient to meet current and ongoing operating costs for the foreseeable future, and to pay part of the Asset Management Fee.
As disclosed on the statement of cash flows, the Series had a net loss of $269,921 for the nine months ended December 31, 2003. However, after adjusting for Equity in Losses of Project Partnerships of $155,495 and the changes in operating assets and liabilities, net cash used in operating activities was $117,040. Cash provided by investing activities totaled $13,941, consisting of cash distributions from the Project Partnerships. There were no unusual events or trends to describe.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
GATEWAY TAX CREDIT FUND II, LTD.
(A Florida Limited Partnership)
By: Raymond James Tax Credit Funds, Inc.
Date: February 13, 2004 By:/s/ Ronald M. Diner
Ronald M. Diner
President
Date: February 13, 2004 By:/s/ Sandra L. Furey
Sandra L. Furey
Secretary and Treasurer
Date: February 13, 2004 By:/s/ Carol Georges
Carol Georges
Vice President and Director of Accounting
CERTIFICATIONS*
I, Ron Diner, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Gateway Tax Credit Fund II, Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
I, Carol Georges, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Gateway Tax Credit Fund II, Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: February 13, 2004 By:/s/ Carol Georges
Carol Georges
Vice President and Director of Accounting