Item 1. Business
Gateway Tax Credit Fund III Ltd. (“Gateway”) is a Florida Limited Partnership. The general partners are Raymond James Tax Credit Funds, Inc., the Managing General Partner, and Raymond James Partners, Inc., (collectively, the “General Partners”) both sponsors of Gateway Tax Credit Fund III Ltd. and wholly owned subsidiaries of Raymond James Financial, Inc. Gateway was formed October 17, 1991 and commenced operations July 16, 1992 with the first admission of Limited Partners.
Gateway is engaged in only one industry segment, to acquire limited partnership interests in unaffiliated limited partnerships (“Project Partnerships”), each of which owns and operates one or more apartment complexes eligible for Low-Income Housing Tax Credits (“Tax Credits”) under Section 42 of the Internal Revenue Code, received over a ten year period. Subject to certain limitations, Tax Credits may be used by Gateway's investors to reduce their income tax liability generated from other income sources. Gateway will terminate on December 31, 2040 or sooner, in accordance with the terms of its Limited Partnership Agreement. As of March 31, 2008, Gateway received capital contributions of $1,000 from the General Partners and from the Limited Partners: $10,395,000 in Series 7, $9,980,000 from Series 8, $6,254,000 from Series 9, $5,043,000 from Series 10 and $5,127,000 from Series 11.
Gateway offered Limited Partnership units in series. Each series invests in a separate and distinct pool of Project Partnerships. Net proceeds from each series were 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 Limited Partners of such series.
Operating profits and losses, cash distributions from operations and Tax Credits are allocated 99% to the Limited Partners and 1% to the General Partners. Profit or loss and cash distributions from sales of property will be allocated as described in the Limited Partnership Agreement.
Gateway initially held investments in 133 Project Partnerships. As more fully described in Item 7 herein, Gateway is presently in the process of disposing of its interests in Project Partnerships which have reached the end of their fifteen-year Tax Credit compliance period. As of March 31, 2008, Gateway held investments in 132 Project Partnerships; 1 Project Partnership has been sold as of March 31, 2008. Project Partnership investments by Series are as follows: 39 Project Partnerships for Series 7, 42 Project Partnerships for Series 8, 24 Project Partnerships for Series 9, 15 Project Partnerships for Series 10 and 12 Project Partnerships for Series 11. Gateway acquired its interests in these properties by becoming a limited partner in the Project Partnerships that own the properties. As of March 31, 2008, the capital received for each series was fully invested in Project Partnerships and management plans no new Project Partnership acquisitions in the future. The primary source of funds for each series is the capital contributions from Limited Partner investors.
All but eight of the Project Partnerships are financed with mortgage loans from the Farmers Home Administration (now called United States Department of Agriculture - Rural Development) ("USDA-RD") under Section 515 of the Housing Act of 1949. These mortgage loans are made at low interest rates for multi-family housing in rural and suburban areas, with the requirement that the interest savings be passed on to low income tenants in the form of lower rents. A significant portion of the project partnerships also receive rental assistance from USDA-RD to subsidize certain qualifying tenants. One property in Series 7 received conventional financing. One property in Series 9, two properties in Series 10 and one property in Series 11 are fully financed through the HOME Investment Partnerships Program. These HOME Program loans provide financing at rates of 0 % to 0.5% for a period of 15 to 42 years. One property in Series 11 is partially financed by HOME. Two properties in Series 11 received conventional financing.
Risks related to the operations of Gateway are described in detail on pages 29 through 38 of the Prospectus, as supplemented, contained in the Registration Statement, File No. 33-44238 (“Prospectus”), under the Caption "Risk Factors" which is incorporated herein by reference. The investment objectives of Gateway are to:
1)
Provide tax benefits to Limited Partners in the form of Tax Credits during the period in which each Project
is eligible to claim Tax Credits;
2) Preserve and protect the capital of each Series.
The investment objectives and policies of Gateway are described in detail on pages 39 through 47 of the Prospectus under the caption "Investment Objectives and Policies" which is incorporated herein by reference.
Item 1. Business (continued)
Gateway's goal is to invest in a diversified portfolio of Project Partnerships located in rural and suburban locations with a high demand for low income housing. As of March 31, 2008 each Series' investor capital contributions were successfully invested in Project Partnerships which met the investment criteria. Management anticipates that competition for tenants will only be with other low income housing projects and not with conventionally financed housing. With a significant number of rural American households living below the poverty level in substandard housing, management believes there will be a continuing demand for affordable low income housing for the foreseeable future.
Gateway has no direct employees. Services are performed by the Managing General Partner and its affiliates and by agents retained by it. The Managing General Partner has full and exclusive discretion in management and control of Gateway.
Exit Strategy Upon expiration of the Project Partnership Tax Credit Compliance Period
The IRS compliance period for low-income housing Tax Credit properties is generally 15 years from occupancy following construction or rehabilitation completion.
Of the original 133 Project Partnership investments, 39 have reached the end of their Tax Credit compliance period as of December 31, 2007 and those Project Partnerships that have yet to reach the end of the Tax Credit compliance period will do so during one of the years ending December 31, 2008 through December 31, 2010. As of March 31, 2008, one of the Project Partnership investments has been sold and, in accordance with the Gateway partnership agreement, the entire net proceeds received from this sale are payable to the Limited Partners of that series of Gateway.
When Project Partnerships reach the end of their Tax Credit compliance period, Gateway initiates a process of disposing of its investments in the Project Partnerships. The objective is to sell Gateway’s interest in the properties for fair market value and ultimately, when Gateway’s last Project Partnership investment is sold, liquidate Gateway.
Item 1A.
Item 1A. Risk Factors
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. No such contributions have been made during fiscal year 2008, 2007 or 2006.
Investors eventually may be allocated profits for tax purposes which exceed any cash Gateway distributes to them. Under these circumstances, unless an investor has passive losses or credits to reduce such tax liability, the investor will have to pay federal income tax without a corresponding cash distribution from Gateway. Similarly, in the event of a sale or foreclosure of an apartment complex, an investor may be allocated taxable income, resulting in a tax liability in excess of any cash distributed to the investor as a result of such event.
There is no assurance that investors will receive any cash distributions from the sale or disposal of a Project Partnership. The price at which a Project Partnership is sold may not be large enough to pay the mortgage and other expenses which must be paid at such time.
Item 1B.
Item 1B. Unresolved Staff Comments.
On January 29, 2008, Gateway received a letter ( the “Letter”) from the staff of the Securities and Exchange Commission (the “Staff”) requesting responses from Gateway on a number of items arising from the Staff’s review of Gateway’s Form 10-K for the fiscal year ended March 31, 2007. Not all of the comments and questions raised by the Staff in the Letter and subsequent replies have been resolved. Specifically, there remains unresolved a question raised by the Staff regarding how Rule 4-08(g) of Regulation S-X should be applied to Gateway, either through its application at a registrant level (i.e., aggregating financial information in all Series in Gateway) or alternatively by application to each individual series within Gateway.
This Form 10-K has been prepared by application of Rule 4-08(g) of Regulation S-X at the registrant level, which is consistent with the methodology of Gateway’s prior year Form 10-K filings. Depending upon the outcome of this matter, the Staff may determine additional disclosures to be required either in an Amended Form 10-K filing or in future Form 10-K filings.
Item 2.
Item 2. Properties
Gateway holds an interest in properties through its limited partnership investments in Project Partnerships. The largest single net investment as of March 31, 2008 in a Project Partnership for each respective Series is: Series 7 is 18.5% of the Series' total assets and 3.1% of Gateway’s total assets, Series 8 is 17.6% of the Series’ total assets and 2.8% of Gateway’s total assets, Series 9 is 20.1% of the Series’ total assets and 2.6% of Gateway’s total assets, Series 10 is 24.9% of the Series’ total assets and 5.6% of Gateway’s total assets, and Series 11 is 24.3% of the Series’ total assets and 7.7% of Gateway’s total assets. The following table provides certain summary information regarding the Project Partnerships in which Gateway had an interest as of December 31, 2007:
Item 2 - Properties (continued):
Item 2 - Properties (continued):
Item 2 - Properties (continued):
Item 2 - Properties (continued):
A summary of the book value of the fixed assets of the Project Partnerships as of December 31, 2007, 2006 and 2005
is as follows:
Item 2 - Properties (continued):
Item 3.
Item 3. Legal Proceedings
Gateway is not a party to any material pending legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
As of March 31, 2008, no matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise.
PART II
Item 5.
Item 5. Market for the Registrant's Securities and Related Security Holder Matters
(a)
Gateway's Limited Partnership interests are not publicly traded. There is no market for Gateway's Limited Partnership interests and it is unlikely that any will develop. No transfers of Limited Partnership Interests are permitted without the prior written consent of the Managing General Partner. There have been numerous transfers from inception to date with most being from individuals to their trusts or heirs. The Managing General Partner is not aware of the price at which Limited Partnership units are transferred. The criteria for and the details regarding transfers are found on pages A-28 and A-29 of the Limited Partnership Agreement under ARTICLE XII under the caption “Transfers of Units” found in the Prospectus, which is incorporated herein by reference.
There have been no distributions paid to Limited Partner investors from inception to date.
(b)
Approximate Number of Equity Security Holders:
Number of Holders
Title of Class as of March 31,
Limited Partner Interest 2,123
General Partner Interest 2
Item 6.
Item 6. Selected Financial Data
FOR THE YEARS ENDED MARCH 31,
SERIES
Total Revenues
$ 36,085
$ 27,050
$ 21,470
$ 24,233
$ 14,725
Net Loss
(345,647)
(366,648)
(467,796)
(261,487)
(261,362)
Equity in Loss of
Project Partnerships
(28,789)
(78,519)
(92,380)
(139,599)
(130,277)
Total Assets
650,076
906,324
1,186,879
1,561,768
1,737,330
Investments In Project Partnerships
284,147
442,787
641,745
965,655
1,127,941
Per Weighted Average
Limited Partnership Unit: (A)
Tax Credits
Portfolio Income
Passive Loss
10.02
(94.93)
.96
8.15
(98.00)
8.05
6.16
(100.77)
21.36
4.56
(109.79)
92.87
5.38
(121.02)
Net Loss
(32.92)
(34.92)
(44.55)
(24.90)
(24.89)
Item 6. Selected Financial Data (continued)
FOR THE YEARS ENDED MARCH 31,
SERIES
Total Revenues
$ 29,379
$ 15,890
$ 16,963
$ 16,447
$ 20,098
Net Loss
(251,652)
(240,629)
(216,489)
(179,166)
(176,442)
Equity in Loss of
Project Partnerships
(54,012)
(15,683)
(29,928)
(41,395)
(39,434)
Total Assets
625,123
741,918
893,391
1,013,718
1,163,295
Investments In Project Partnerships
296,532
377,733
415,344
461,161
512,795
Per Weighted Average
Limited Partnership Unit: (A)
Tax Credits
Portfolio Income
Passive Loss
12.04
(110.05)
1.55
10.68
(110.42)
16.92
7.30
(110.88)
56.12
5.23
(121.46)
140.61
5.04
(127.45)
Net Loss
(31.71)
(23.87)
(21.48)
(17.77)
(17.50)
FOR THE YEARS ENDED MARCH 31,
SERIES
Total Revenues
$ 8,514
$ 6,166
$ 4,437
$ 7,752
$ 4,246
Net Loss
(242,723)
(248,128)
(341,082)
(234,846)
(311,941)
Equity in Loss of
Project Partnerships
(100,405)
(117,893)
(101,726)
(157,684)
(230,291)
Total Assets
502,778
694,273
893,314
1,180,228
1,395,878
Investments In Project Partnerships
292,761
412,287
550,442
798,862
967,040
Per Weighted Average
Limited Partnership Unit: (A)
Tax Credits
Portfolio Income
Passive Loss
8.73
(112.02)
7.40
(103.96)
6.34
5.41
(90.51)
102.00
3.98
(105.86)
153.39
4.44
(112.92)
Net Loss
(38.42)
(39.28)
(53.99)
(37.18)
(49.38)
Item 6. Selected Financial Data (continued)
FOR THE YEARS ENDED MARCH 31,
SERIES
Total Revenues
$ 2,129
$ 2,563
$ 2,561
$ 2,511
$ 1,932
Net Loss
(561,574)
(261,712)
(355,932)
(186,236)
(228,743)
Equity in Loss of
Project Partnerships
(75,336)
(113,347)
(111,553)
(133,597)
(175,628)
Total Assets
872,011
1,398,676
1,626,672
1,945,888
2,223,393
Investments In Project Partnerships
672,563
1,159,544
1,360,959
1,661,049
1,815,475
Per Weighted Average
Limited Partnership Unit: (A)
Tax Credits
Portfolio Income
Passive Loss
9.28
(79.58)
8.75
(91.68)
9.58
7.55
(90.73)
106.09
6.36
(111.19)
151.14
6.94
(89.01)
Net Loss
(110.24)
(51.38)
(69.87)
(36.58)
(44.91)
FOR THE YEARS ENDED MARCH 31,
SERIES
Total Revenues
$ 2,782
$ 3,382
$ 3,382
$ 2,783
$ 2,182
Net Loss
(628,777)
(470,714)
(776,165)
(153,967)
(143,577)
Equity in Loss of
Project Partnerships
(74,752)
(32,981)
(96,562)
(112,606)
(101,608)
Total Assets
1,220,597
1,821,412
2,271,082
3,034,176
3,228,629
Investments In Project Partnerships
935,152
1,505,978
1,926,349
2,664,780
2,799,412
Per Weighted Average
Limited Partnership Unit: (A)
Tax Credits
Portfolio Income
Passive Loss
7.55
(67.19)
8.57
6.61
(56.12)
110.21
5.75
(52.47)
145.72
4.33
(99.03)
147.19
4.71
(75.39)
Net Loss
(121.41)
(90.89)
(149.87)
(29.73)
(27.72)
FOR THE YEARS ENDED MARCH 31,
TOTAL SERIES 7 - 11
Total Revenues
$ 78,889
$ 55,051
$ 48,813
$ 53,726
$ 43,183
Net Loss
(2,030,373)
(1,587,831)
(2,157,464)
(1,015,702)
(1,122,065)
Equity in Loss of
Project Partnerships
(333,294)
(358,423)
(432,149)
(584,881)
(677,238)
Total Assets
3,870,585
5,562,603
6,871,338
8,735,778
9,748,525
Investments In Project Partnerships
2,481,155
3,898,329
4,894,839
6,551,507
7,222,663
(A) The tax information is as of December 31, the year end for tax purposes.
The above selected financial data should be read in conjunction with the financial statements and related notes appearing elsewhere in this report. This statement is not covered by the auditor's opinion included elsewhere in this report.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This item should be read in conjunction with the financial statements and other items contained elsewhere in this report.
The Managing General Partner monitors developments in the area of legal and regulatory compliance. For example, the Sarbanes-Oxley Act of 2002 (the “Act”) mandates or suggests additional compliance measures with regard to governance, disclosure, audit and other areas, and certain provisions of the Act have been implemented by Gateway and other provisions will be implemented by Gateway in subsequent years. In light of these additional requirements of the Act, Gateway has and expects to continue to incur increased expenses related to compliance with the Act.
Results of Operations, Liquidity and Capital Resources
Operations commenced on July 16, 1992 with the admission of the first Limited Partners in Series 7. The proceeds from Limited Partner investors' capital contributions available for investment were used to acquire interests in Project Partnerships.
Gateway - All Series - The following discusses the overall results of operations, liquidity and capital resources for Gateway as a whole. A summary of the activity within each specific Series of Gateway then follows.
Distribution income arises from any cash distributions received from Project Partnerships which have a zero investment balance for financial reporting purposes. Distribution income increased 43% in fiscal year 2008 to $78,889, an increase of $23,838 from the fiscal year 2007 distribution income of $55,051, which represented a $6,238 or 13% increase as compared to distribution income of $48,813 in fiscal year 2006.
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 investors' return of their original capital contribution).
Total expenses of Gateway were $1,921,489 for the fiscal year ended March 31, 2008, an increase of $536,421 as compared to the fiscal year 2007 total expenses of $1,385,068, which represented a $485,465 decrease in total expenses as compared to the fiscal year 2006 amount of $1,870,533. Impairment expense represents a significant component of total expenses in fiscal year 2008, 2007 and 2006. Impairment expense is a non-cash element of expense that arises whenever events or changes in circumstances indicate that the recorded carrying value of a respective Investment in Project Partnership may not be recoverable. During fiscal years 2008, 2007 and 2006, impairment expense was recorded in the aggregate amount of $962,003, $467,646, and $1,078,223, respectively. Net of this impairment expense, expenses of Gateway increased $42,064, or 5% in fiscal year 2008 versus fiscal year 2007. The increase in fiscal year 2008 results from increases in the expense of the General Partner in administering the business of Gateway. The fiscal year 2007 expense represented a $125,112, or 16%, increase over the fiscal year 2006 amount of $792,310 net of impairment expense.
The sources of funds to pay the expenses of Gateway are cash and cash equivalents and short-term investments which are comprised of U.S. Treasury Security Strips ("Zero Coupon Treasuries") and U.S. Treasury Notes along with the interest earnings thereon, which were purchased with funds set aside for this purpose, and cash distributed to the Series from the operations of the Project Partnerships. Due to the rent limitations applicable to the Project Partnerships projects as a result of their qualifying for Low-Income Housing Tax Credits, Gateway does not expect there to be a significant increase in future rental income of the Project Partnerships. Therefore, cash distributions from the operations of the Project Partnerships are not expected to increase in the near future. Management believes these 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.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
For the year ended March 31, 2008 the Project Partnerships reported losses of $333,294 which represents a $25,129 decrease as compared to the losses from Project Partnerships for the year ended March 31, 2007 of $358,423. For the fiscal year ended March 31, 2006, the Project Partnerships reported a loss of $432,149. Typically, it is customary in the low-income housing Tax Credit industry to experience losses for financial and tax reporting purposes because of the non-cash expenses of depreciation and amortization. Since Gateway invests as a limited partner in Project Partnerships, and is therefore not obligated to fund losses or make additional capital contributions, Gateway does not recognize losses from individual Project Partnerships to the extent that these losses would reduce the investment balance below zero. Therefore, as the Project Partnership investments mature and the Investments in Project Partnership balances decrease over time, the losses from Project Partnerships recorded by Gateway decrease.
In fiscal year 2008, the Gain on Sale of Project Partnerships amounted to $68,000 as compared to $0 for the fiscal years 2007 and 2006. As more fully discussed herein, one Project Partnership investment was sold in fiscal year 2008 as compared to none in fiscal years 2007 and 2006. The amount of the gain or loss on a sale of a Project Partnership and the year in which it is recognized on the Statement of Operations is dependent upon the specifics related to each sale transaction. Refer to the discussion of the Project Partnership sold in the exit strategy section that follows.
In total, Gateway reported a net loss of $2,030,373 from operations for the year ended March 31, 2008. Cash and Cash Equivalents increased by $161,946 but Investments in Securities decreased by $308,359. Of the Cash and Cash Equivalents on hand as of March 31, 2008, $68,000 is payable to the Series 8 Limited Partners arising from the sale of one Project Partnership during fiscal year 2008; such distribution to those certain Limited Partners will occur in fiscal year 2009. After consideration of these sales proceeds, Cash and Cash Equivalents and Investments in Securities decreased $214,413 as compared to the prior year-end balances.
The financial performance of each respective Series is summarized as follows:
Series 7 - Gateway closed this series on October 16, 1992 after receiving $10,395,000 from 635 Limited Partner investors. As of March 31, 2008, the series had invested $7,732,089 in 39 Project Partnerships located in 14 states containing 1,195 apartment units. Average occupancy of the Project Partnerships was 96% at December 31, 2007.
Equity in Loss of Project Partnerships for the year ended March 31, 2008 of $28,789 was $49,730 less than the Equity in Loss of Project Partnerships for the year ended March 31, 2007 which amounted to $78,519. 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. (These Project Partnerships reported depreciation and amortization of $1,472,897, $1,475,207, and $1,495,597 for the years ended December 31, 2005, 2006 and 2007, respectively). As a result, management expects that this Series, as well as the Series described below, will report its equity in Project Partnerships as a loss for tax and financial reporting purposes. Gateway reviews its investments in 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. For the fiscal years ended March 31, 2008, 2007 and 2006, impairment expense of $99,867, $76,196, and $193,195 were recognized in Series 7, respectively. Overall management believes the Project Partnerships are operating as expected and generated Tax Credits which met projections.
At March 31, 2008, the Series had $162,586 of Cash and Cash Equivalents. In addition, the Series had $202,647 in U.S. Treasury Notes with a maturity value of $200,000 at June 30, 2008. 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 $345,647 for the year ended March 31, 2008. However, after considering the Equity in Loss of Project Partnerships of $28,789 and the changes in operating assets and liabilities, net cash used in operating activities was $145,300. Cash provided by investing activities totaled $128,868 consisting of $40,134 in cash distributions from the Project Partnerships and $289,000 from matured investment securities ($203,000 in U.S. Treasury Notes and $86,000 in Zero Coupon Treasuries), offset by $200,266 used to purchase U.S. Treasury Notes in July 2007.
Series 8 - Gateway closed this Series on June 28, 1993 after receiving $9,980,000 from 664 Limited Partner investors. As of March 31, 2008, the series had invested $7,400,711 in 42 Project Partnerships located in 18 states containing 1,175 apartment units. Average occupancy of the Project Partnerships was 94% at December 31, 2007.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Equity in Loss of Project Partnerships for the year ended March 31, 2008 of $54,012 was $38,329 more than the Equity in Loss of Project Partnerships for the year ended March 31, 2007 which amounted to $15,683. 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. (These Project Partnerships reported depreciation and amortization of $1,485,669, $1,514,946, and $1,489,012 for the years ended December 31, 2005, 2006 and 2007, respectively). Gateway reviews its investments in 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. For the fiscal year ended March 31, 2008, impairment expense of $31,346 was recognized. There was no impairment expense in fiscal years 2007 and 2006. Overall management believes the Project Partnerships are operating as expected and generated Tax Credits which met projections.
At March 31, 2008, the Series had $252,598 of Cash and Cash Equivalents. In addition, the Series had $75,993 in U.S. Treasury Notes with a maturity value of $75,000 at June 30, 2008. 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 $251,652 for the year ended March 31, 2008. However, after adjusting for Equity in Loss of Project Partnerships of $54,012 and the changes in operating assets and liabilities, net cash used in operating activities was $120,736. Cash provided by investing activities totaled $238,204 consisting of $36,304 in cash distributions from the Project Partnerships, $68,000 in net proceeds from the Sale of Project Partnership (refer to the exit strategy section herein for more detailed discussion of this sale of Project Partnership), and $209,000 from matured investment securities ($127,000 in U.S. Treasury Notes and $82,000 in Zero Coupon Treasuries), offset by $75,100 used to purchase U.S. Treasury Notes in July 2007.
Series 9 - Gateway closed this Series on September 30, 1993 after receiving $6,254,000 from 406 Limited Partner investors. As of March 31, 2008, the series had invested $4,914,116 in 24 Project Partnerships located in 11 states containing 624 apartment units. Average occupancy of the Project Partnerships was 94% at December 31, 2007.
Equity in Loss of Project Partnerships for the year ended March 31, 2008 of $100,405 was $17,488 less than the Equity in Loss of Project Partnerships for the year ended March 31, 2007 which amounted to $117,893. 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. (These Project Partnerships reported depreciation and amortization of $767,851, $774,921, and $784,023 for the years ended December 31, 2005, 2006 and 2007, respectively). Gateway reviews its investments in 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. There was no impairment expense in fiscal year 2008 and 2007. For the fiscal year ended March 31, 2006 impairment expense of $127,532 was recognized. Overall management believes the Project Partnerships are operating as expected and generated Tax Credits which met projections.
At March 31, 2008, the Series had $64,247 of Cash and Cash Equivalents. Series 9 also had $44,447 in Zero Coupon Treasuries with annual maturities providing $45,000 in the current fiscal year and $47,000 in fiscal year 2009. In addition, the Series had $101,323 in U.S. Treasury Notes with a maturity value of $100,000 at June 30, 2008. 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 $242,723 for the year ended March 31, 2008. However, after considering the Equity in Loss of Project Partnerships of $100,405 and the changes in operating assets and liabilities, net cash used in operating activities was $93,246. Cash provided by investing activities totaled $87,449 consisting of $15,582 in cash distributions from the Project Partnerships and $172,000 from matured investment securities ($127,000 in U.S. Treasury Notes and $45,000 in Zero Coupon Treasuries), offset by $100,133 used to purchase U.S. Treasury Notes in July 2007.
Series 10 - Gateway closed this Series on January 21, 1994 after receiving $5,043,000 from 325 Limited Partner investors. As of March 31, 2008, the series had invested $3,914,672 in 15 Project Partnerships located in 10 states containing 409 apartment units. Average occupancy of the Project Partnerships was 98% at December 31, 2007.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Equity in Loss of Project Partnerships for the year ended March 31, 2008 of $75,336 was $38,011 less than the Equity in Loss of Project Partnerships for the year ended March 31, 2007 which amounted to $113,347. 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. (These Project Partnerships reported depreciation and amortization of $466,542, $465,986, and $479,429 for the years ended December 31, 2005, 2006, and 2007, respectively). Gateway reviews its investments in 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. For the fiscal years ended March 31, 2008, 2007, and 2006, impairment expense of $376,185, $46,129, and $156,694 were recognized, respectively. Overall, management believes the Project Partnerships are operating as expected and generated Tax Credits which met projections.
At March 31, 2008, the Series had $79,049 of Cash and Cash Equivalents. Series 10 also had $69,737 in Zero Coupon Treasuries with annual maturities providing $34,000 in fiscal year 2008 increasing to $40,000 in fiscal year 2010. In addition, the Series had $50,662 in U.S. Treasury Notes with a maturity value of $50,000 at June 30, 2008. 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 $561,574 for the year ended March 31, 2008. However, after considering the Equity in Loss of Project Partnerships of $75,336 and the changes in operating assets and liabilities, net cash used in operating activities was $59,719. Cash provided by investing activities totaled $98,417 consisting of $13,483 in cash distributions from the Project Partnerships and $135,000 from matured investment securities ($101,000 in U.S. Treasury Notes and $34,000 in Zero Coupon Treasuries), offset by $50,066 used to purchase U.S. Treasury Notes in July 2007.
Series 11 - Gateway closed this Series on April 29, 1994 after receiving $5,127,000 from 330 Limited investors. As of March 31, 2008 the series had invested $4,128,042 in 12 Project Partnerships located in 7 states containing 361 apartment units. Average occupancy of the Project Partnerships was 90% at December 31, 2007.
Equity in Loss of Project Partnerships for the year ended March 31, 2008 of $74,752 was $41,771 more than the Equity in Loss of Project Partnerships for the year ended March 31, 2007 which amounted to $32,981. 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. (These Project Partnerships reported depreciation and amortization of $506,550, $498,431, and $529,741 for the years ended December 31, 2005, 2006, and 2007, respectively). Gateway reviews its investments in 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. For the fiscal years ended March 31, 2008, 2007, and 2006, impairment expense of $454,605, $345,321, and $600,802 were recognized, respectively. Overall, management believes the Project Partnerships are operating as expected and generated Tax Credits which met projections.
At March 31, 2008, the Series had $81,179 of Cash and Cash Equivalents. Series 11 also had $77,612 in Zero Coupon Treasuries with annual maturities providing $40,000 in fiscal year 2008 increasing to $44,000 in fiscal year 2010. In addition, the Series had $126,654 in U.S. Treasury Notes with a maturity value of $125,000 at June 30, 2008. 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 $628,777 for the year ended March 31, 2008. However, after considering the Equity in Loss of Project Partnerships of $74,752 and the changes in operating assets and liabilities, net cash used in operating activities was $49,579. Cash provided by investing activities totaled $77,588, consisting of $10,754 in cash distributions from Project Partnerships and $192,000 from matured investment securities ($152,000 in U.S. Treasury Notes and $40,000 in Zero Coupon Treasuries), offset by $125,166 used to purchase U.S. Treasury Notes in July 2007.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Critical Accounting Estimates
Gateway reviews its investments in 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. For the fiscal year ended March 31, 2008, impairment expense was recognized in the Statement of Operations in the following Series and in the following amounts: Series 7 - $99,867, Series 8 - $31,346, Series 10 - $376,185, and Series 11 - $454,605. The total impairment expense for all Series in Gateway for fiscal year 2008 was $962,003. For the fiscal year ended March 31, 2007, impairment expense was recognized in the Statement of Operations in the following Series and in the following amounts: Series 7 - $76,196, Series 10 - $46,129, and Series 11 - $345,321. The total impairment expense for all Series in Gateway for fiscal year 2007 was $467,646. For the fiscal year ended March 31, 2006, impairment expense was recognized in the Statement of Operations in the following Series and in the following amounts: Series 7 - $193,195, Series 9 - $127,532, Series 10 - $156,694, and Series 11 - $600,802. The total impairment expense for all Series in Gateway for fiscal year 2006 was $1,078,223. Impairment loss is an estimate based on management's knowledge and experience. Accordingly, actual results could differ from these estimates.
Recent Accounting Changes
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS No. 157"), which provides enhanced guidance for using fair value to measure assets and liabilities. FAS No. 157 establishes a common definition of fair value and provides a framework for measuring fair value under U.S. general accepted accounting principles and expands disclosure requirements about fair value measurements. FAS No. 157 is effective for financial statements issued in fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.
In February 2008, the FASB issued FASB Staff Position ("FSP") 157-2, "Effective Date of FASB Statement No. 157", which delays the effective date of FAS No. 157 for all nonfinancial assets and liabilities except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis until November 15, 2008. Gateway will adopt FAS No. 157 effective in fiscal year 2009. The adoption of this standard is not expected to have a material impact on Gateway’s financial position, operations or cash flow.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("FAS No. 159"), which permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. FAS No. 159 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Gateway will adopt FAS No. 159 in fiscal year 2009. The adoption of this standard is not expected to have a material impact on Gateway’s financial position, operations or cash flow.
Exit Strategy Upon expiration of the Project Partnership Tax Credit Compliance Period
The IRS compliance period for low-income housing Tax Credit properties is generally 15 years from occupancy following construction or rehabilitation completion.When Project Partnerships reach the end of their tax credit compliance period, Gateway will initiate the process of disposing of its investment in the Project Partnership, the objective of the process is to sell Gateway’s interest in the properties for fair market value and ultimately, when Gateway’s last Project Partnership investment is sold, liquidate Gateway. Generally, the market for Project Partnerships is limited. Some of the factors which negatively impact the marketability of these projects include (1) requirements by government agencies that the project’s mortgagor continue to maintain the property in the low-income housing program, and (2) the mortgage balance of the property is very near the initial balance as a result of the heavily subsidized debt of the Project Partnerships and lengthy (usually 50 year) amortization periods.
As of March 31, 2008, Gateway holds a limited partner interest in 132 Project Partnerships which own and operate government assisted multi-family housing complexes. Project investments by Series are as follows: 39 Project Partnerships for Series 7, 42 Project Partnerships for Series 8, 24 Project Partnerships for Series 9, 15 Project Partnerships for Series 10, and 12 Project Partnerships for Series 11. As of December 31, 2007, 39 of the Project Partnerships had reached the end of their Tax Credit compliance period. However, all of the other 94 Project Partnerships will reach the end of the Tax Credit compliance period during one of the years ending December 31, 2008 through December 31, 2010. As of March 31, 2008, one of the Project Partnerships has been sold (in Series 8) and, in accordance with the Gateway partnership agreement, the entire net proceeds received from this sale will be distributed to the Limited Partners of that Series. Gateway at one time held investments in 133 Project Partnerships (39 in Series 7, 43 in Series 8, 24 in Series 9, 15 in Series 10, and 12 in Series 11). A summary of the sale transaction for all Project Partnerships sold during the past three fiscal years are summarized below:
Fiscal Year 2008 Disposition Activity:
Series 8
Transaction
Month / Year
Project Partnership
Net Proceeds
Net Proceeds
Per LP Unit
Gain (Loss)
on Disposal
March
Morningside Villa
$ 68,000
$ 6.81
$ 68,000
$ 68,000
The net proceeds from the sale of Morningside Villa are a component of the Distribution Payable on the Balance Sheet as of March 31, 2008. These net proceeds will be distributed to the Series 8 Limited Partners during fiscal year 2009.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Status Update on Unsold Project Partnerships:
The following summarizes the most recent status of the sale/disposal process for the Project Partnership investments held as of March 31, 2008:
Gateway has consented to the general partner granting an option for either the general partner or a third-party to purchase the Project Partnership interest:
Series 7
Pioneer Apartments, an Arkansas Limited Partnership
Spring Creek Apartments II, L.P.
Should both of these options be exercised, the estimated net sales proceeds to Gateway from the sales transactions are estimated to be $201,000, or $19.34 per limited partnership unit potentially available for distribution to the Series 7 Limited Partners over the next 18 months. These options to purchase could expire without being exercised which would result in no sales proceeds and remarketing of the Project Partnerships, the results of which are undeterminable.
Project Partnerships currently or previously listed for sale on a commercial real estate for sale website or listed for sale by the general partner of the Project Partnership:
Series 7
Cedar Hollow Apartments Limited Partnership
Sunrise I Apartments Limited Partnership
Burbank Apartments Limited Partnership
Washington Apartments Limited Partnership
Walnut Apartments Limited Partnership
Disclosure of Contractual Obligations
(1) The Other Liabilities represent the asset management fees and other general and administrative expense reimbursements owed to the General Partners as of March 31, 2008. This payable is unsecured, due on demand and, in accordance with the limited partnership agreement, non-interest bearing. As referred to in Note 4, the Managing General Partner does not intend to demand payment of the portion of this balance reflected as due later than one year within the next twelve months.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
As a smaller reporting company, no information is required.
Item 8.
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of Gateway Tax Credit Fund III Ltd.
We have audited the accompanying balance sheets of Gateway Tax Credit Fund III Ltd. (a Florida Limited Partnership) - Series 7 through 11, in total and for each series, as of March 31, 2008 and 2007, and the related statements of operations, partners’ equity (deficit), and cash flows for the total partnership and for each of the series for each of the years in the three-year period ended March 31, 2008. Gateway’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of certain Project Partnerships for which net losses of $64,475 are included in the total partnership loss for the year ended March 31, 2006; and of the loss for Series 7 for the year ended March 31, 2006, $0; and of the loss for Series 8 for the year ended March 31, 2006, $21,534; and of the loss for Series 9 for the year ended March 31, 2006, $799; and of the loss for Series 10 for the year ended March 31, 2006, $42,142; and of the loss for Series 11 for the year ended March 31, 2006, $0. Those statements were audited by other auditors, whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for such underlying partnerships, is based solely on the reports of the other auditors.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Gateway is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Gateway’s internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Gateway Tax Credit Fund III Ltd. - Series 7 through 11, in total and for each series, as of March 31, 2008 and 2007, and the results of its operations and its cash flows for the total partnership and for each of the series for each of the years in the three-year period ended March 31, 2008, in conformity with accounting principles generally accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed under Item 15(a)(2) in the index are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, based on our audits and the reports of other auditors, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
/s/ Reznick Group, P.C.
REZNICK GROUP, P.C.
Atlanta, Georgia
July 11,
GATEWAY TAX CREDIT FUND III LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
MARCH 31, 2008 AND
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND III LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
MARCH 31, 2008 AND
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND III LTD.
(A Florida Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31,
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND III LTD.
(A Florida Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31,
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND III LTD.
(A Florida Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31,
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND III LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (deficit)
FOR THE YEARS ENDED MARCH 31, 2008, 2007 AND 2006:
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND III LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (deficit)
FOR THE YEARS ENDED MARCH 31, 2008, 2007 AND 2006:
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND III LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (deficit)
FOR THE YEARS ENDED MARCH 31, 2008, 2007 AND 2006:
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND III LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2008, 2007 AND 2006:
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND III LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2008, 2007 AND 2006:
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND III LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2008, 2007 AND 2006:
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND III LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2008, 2007 AND 2006:
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND III LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2008, 2007 AND 2006:
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND III LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2008, 2007 AND 2006:
See accompanying notes to financial statements.
GATEWAY TAX CREDIT FUND III LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2008, 2007 AND
NOTE 1 - ORGANIZATION:
Gateway Tax Credit Fund III Ltd. (“Gateway”), a Florida Limited Partnership, was formed October 17, 1991 under the laws of Florida. Gateway offered its limited partnership interests in Series (“Series”). The first Series for Gateway is Series 7. Operations commenced on July 16, 1992 for Series 7, January 4, 1993 for Series 8, September 30, 1993 for Series 9, January 21, 1994 for Series 10 and April 29, 1994 for Series 11. Each Series invests, as a limited partner, in other limited partnerships (“Project Partnerships”), each of which owns and operates apartment complexes eligible for Low-Income Housing Tax Credits (“Tax Credits”), provided for in Section 42 of the Internal Revenue Code of 1986. Gateway will terminate on December 31, 2040 or sooner, in accordance with the terms of the limited partnership agreement (the “Agreement”). As of March 31, 2008, Gateway had received capital contributions of $1,000 from the General Partners and $36,799,000 from the investor Limited Partners.
Raymond James Partners, Inc. and Raymond James Tax Credit Funds, Inc., wholly owned subsidiaries of Raymond James Financial, Inc., are the General Partner and Managing General Partner, respectively.
Gateway received capital contributions of $10,395,000, $9,980,000, $6,254,000, $5,043,000 and $5,127,000 from the investor Limited Partners in Series 7, 8, 9, 10 and 11, respectively. Each Series will be treated as though it were a separate partnership, investing in a separate and distinct pool of Project Partnerships. Income or loss and all tax items from the Project Partnerships acquired by each Series are specifically allocated among the Limited Partners of such Series.
Operating profits and losses, cash distributions from operations and Tax Credits from each Series are generally allocated 99% to the Limited Partners in that Series and 1% to the General Partners. Profit or loss and cash distributions from sales of property by each Series are allocated as specified in the Agreement.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting
Gateway utilizes an accrual basis of accounting whereby revenues are recognized as earned and expenses are recognized as obligations are incurred.
Gateway accounts for its investments as the 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 loss 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,
3) Decreased for the amortization of the acquisition fees and expenses, and
4) Increased for loans or advances made to the Project Partnership by Gateway.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued):
For the fiscal year ended March 31, 2006, Gateway changed the period over which the intangible acquisition fees and expenses are amortized. In all years prior to March 31, 2006, the period in which such intangible assets had been amortized was 35 years. In the fiscal year ended March 31, 2006, this amortization period was changed to 15 years to better approximate the period over which the benefits of these investments are realized. As a result of this change in estimate, an additional amortization expense of $24,835 for Series 7, $10,553 for Series 8, $9,817 for Series 9, $19,964 for Series 10 and $27,587 for Series 11, or a total of $92,756 for all Series of Gateway, was recognized during the year-ended March 31, 2006, as compared to the amortization expense amount which would have been realized had the estimated amortization period not changed during the year. The amortization expense is shown 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. In accordance with Emerging Issues Task Force (EITF) 98-13, once the net investment in a Project Partnership is reduced to zero, receivables due from the Project Partnership are decreased by Gateway’s share of Project Partnership losses. The suspended losses will be used to offset future income from the individual Project Partnerships. Any cash distributions received from Project Partnerships which have a zero investment balance are accounted for as distribution income in the period the cash distribution is received by Gateway.
Gateway reviews its investments in 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. For the fiscal year ended March 31, 2008, impairment expense was recognized in the Statement of Operations in the following Series and in the following amounts: Series 7 - $99,867, Series 8 - $31,346, Series 10 - $376,185, and Series 11 - $454,605. The total impairment expense for all Series in Gateway for fiscal year 2008 was $962,003. For the fiscal year ended March 31, 2007, impairment expense was recognized in the Statement of Operations in the following Series and in the following amounts: Series 7 - $76,196, Series 10 - $46,129, and Series 11 - $345,321. The total impairment expense for all Series in Gateway for fiscal year 2007 was $467,646. Refer to Note 5 - Investments in Project Partnerships for further details regarding the components of the Investments in Project Partnership balance.
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 for 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. However, Gateway does not guarantee any of the mortgages or other debt of the Project Partnerships. No such funding to Project Partnerships occurred during fiscal year 2006, 2007, or 2008.
Cash and Cash Equivalents
Gateway's policy is 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.
Concentrations of Credit Risk
Financial instruments which potentially subject Gateway to concentrations of credit risk consist of cash investments in a money market mutual fund whose investment advisor is a wholly owned subsidiary of Raymond James Financial, Inc. and U.S. Treasury securities.
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.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued):
Investment in Securities
Gateway applies Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities (“FAS 115”) (refer to Note 3 herein). 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, which are comprised of U.S. Government Security Strips and U.S. Treasury Notes (collectively the “Gateway Securities”), until maturity and to use these investments to fund Gateway's ongoing operations. Interest income is recognized ratably on the Gateway Securities using the effective yield to maturity. The Gateway Securities are carried at amortized cost, which approximates market value, and are adjusted for amortization of premiums and accretion of discounts to maturity. Such adjustments are included in interest income.
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.
Variable Interest Entities
In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN46”), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51” which was subsequently revised in December 2003. Gateway has adopted FIN 46 and applied its requirements to all Project Partnerships in which Gateway holds an interest. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics, (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. FIN 46 requires a VIE to be consolidated in the financial statements of the entity that is determined to be the primary beneficiary of the VIE. The primary beneficiary, as is applicable to Gateway’s circumstances, is the party in the Project Partnership equity group that is most closely associated with the Project Partnership.
Gateway holds variable interests in 127 VIEs, which consist of Project Partnerships, of which Gateway is not the primary beneficiary. Five of Gateway’s Project Partnership investments have been determined not to be VIEs. Gateway’s maximum exposure to loss as a result of its involvement with unconsolidated VIEs is limited to Gateway’s capital contributions to and receivables from those VIEs, which is approximately $26,019,151 at March 31, 2008. Gateway may be subject to additional losses to the extent of any financial support that Gateway voluntarily provides to those Project Partnerships in the future.
Recent Accounting Changes
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS No. 157"), which provides enhanced guidance for using fair value to measure assets and liabilities. FAS No. 157 establishes a common definition of fair value and provides a framework for measuring fair value under U.S. general accepted accounting principles and expands disclosure requirements about fair value measurements. FAS No. 157 is effective for financial statements issued in fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.
In February 2008, the FASB issued FASB Staff Position ("FSP") 157-2, "Effective Date of FASB Statement No. 157", which delays the effective date of FAS No. 157 for all nonfinancial assets and liabilities except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis until November 15, 2008. Gateway will adopt FAS No. 157 effective in fiscal year 2009. The adoption of this standard is not expected to have a material impact on Gateway’s financial position, operations or cash flow.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("FAS No. 159"), which permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. FAS No. 159 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Gateway will adopt FAS No. 159 in fiscal year 2009. The adoption of this standard is not expected to have a material impact on Gateway’s financial position, operations or cash flow.
NOTE 3 - INVESTMENT IN SECURITIES:
The March 31, 2008 Balance Sheet includes Gateway Securities at cost, plus accreted interest income or unamortized premiums in the case of U.S. Treasury Notes, as applicable, of $2,577 for Series 7, $966 for Series 8, $27,945 for Series 9, $44,885 for Series 10 and $52,011 for Series 11. The Gateway Securities are commonly held in a brokerage account maintained at Raymond James and Associates, Inc., an affiliate of the General Partners. A separate accounting is maintained for each series’ share of the investments.
Estimated Market
Value
Cost Plus Accreted Interest
and Unamortized Premiums
Gross Unrealized
Gains (Losses)
Series
$ 201,844
$ 202,647
$ (803)
Series
75,692
75,993
(301)
Series
147,310
145,770
1,540
Series
124,852
120,399
4,453
Series
210,352
204,266
6,086
NOTE 3 - INVESTMENT IN SECURITIES (Continued):
As of March 31, 2008, the cost and accreted interest / unamortized premium of debt securities by contractual maturities is as follows:
Series
Series Series
Due within 1 year
$ 202,647
$ 75,993
$ 145,770
After 1 year through 5 years
Total Amount Carried on Balance Sheet
$ 202,647
$ 75,993
$ 145,770
Series
Series
Total
Due within 1 year
$ 84,937
$ 166,036
$ 675,383
After 1 year through 5 years
35,462
38,230
73,692
Total Amount Carried on Balance Sheet
$ 120,399
$ 204,266
$ 749,075
NOTE 4 - RELATED PARTY TRANSACTIONS:
The Payable to General Partners primarily represents the asset management fees and general and administrative expenses owed to the General Partners at the end of the period. It is unsecured, due on demand and, in accordance with the Agreement, non-interest bearing. Within the next 12 months, the Managing General Partner does not intend to demand payment on the portion of Asset Management Fees payable classified as long-term on the Balance Sheet.
Value Partners, Inc., an affiliate of Gateway, acquired the general partner interest in Logan Heights, one of the Project Partnerships in Series 8, in 2003.
For the years ended March 31, 2008, 2007, and 2006 the General Partners and affiliates are entitled to compensation and reimbursement for costs and expenses incurred by Gateway as follows:
Asset Management Fee - The Managing General Partner is entitled to receive an annual asset management fee equal to the greater of (i) $2,000 for each limited partnership in which Gateway invests, or (ii) 0.275% of Gateway's gross proceeds from the sale of limited partnership interests. In either event (i) or (ii), the maximum amount may not exceed 0.2% of the aggregate cost (Gateway's capital contribution plus Gateway's share of the Properties' mortgage) of Gateway's interest in properties 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.
Series
$ 85,596
$ 85,926
$ 86,447
Series
89,020
89,370
89,908
Series
49,068
49,242
49,509
Series
33,536
33,643
33,819
Series
28,699
27,989
28,021
Total
$ 285,919
$ 286,170
$ 287,704
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
$ 124,429
$ 109,100
$ 84,526
Series
136,878
120,278
93,195
Series
76,571
67,132
52,016
Series
47,857
41,958
32,510
Series
38,286
33,565
26,008
Total
$ 424,021
$ 372,033
$ 288,255
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued):
Total unpaid asset management fees and administrative expenses payable to the General Partners, which are included on the Balance Sheet as of March 31, 2008 and 2007 are as follows:
March 31,
March 31,
Series
$ 880,008
$ 790,609
Series
959,682
824,825
Series
559,030
507,802
Series
145,423
110,514
Series
62,077
34,115
Total
$ 2,606,220
$ 2,267,865
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS:
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (Continued):
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (Continued):
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (Continued):
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (Continued):
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (Continued):
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (Continued):
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (Continued):
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (Continued):
NOTE 5 - INVESTMENTS IN PROJECT PARTNERSHIPS (Continued):
Gateway’s equity by Series as reflected by the Project Partnerships differs from the Investments in Project Partnerships before acquisition fees and expenses and amortization by Series primarily because of suspended losses on Gateway’s books and differences in the accounting treatment of miscellaneous items.
By Series these differences are as follows:
Equity Per Project Partnership
Equity Per Gateway
Series
$ (6,059,892)
$ 141,916
Series
(6,781,537)
(54,525)
Series
(2,187,748)
271,682
Series
684,835
1,186,347
Series
1,175,899
2,227,037
NOTE 6 - SUMMARY OF DISPOSITION ACTIVITIES:
Gateway at one time held investments in 133 Project Partnerships (39 in Series 7, 43 in Series 8, 24 in Series 9, 15 in Series 10, and 12 in Series 11). As of March 31, 2008, Gateway has sold its interest in 1 Project Partnership (in Series 8). A summary of the sale transaction for all Project Partnerships sold during the past three fiscal years are summarized below:
Fiscal Year 2008 Disposition Activity:
Series 8
Transaction
Month / Year
Project Partnership
Net Proceeds
Net Proceeds
Per LP Unit
Gain (Loss)
on Disposal
March
Morningside Villa
$ 68,000
$ 6.81
$ 68,000
$ 68,000
The net proceeds from the sale of Morningside Villa are a component of the Distribution Payable on the Balance Sheet as of March 31, 2008. These net proceeds will be distributed to the Series 8 Limited Partners during fiscal year 2009.
NOTE 7 - TAXABLE INCOME (LOSS):
The following is a reconciliation between net loss as described in the financial statements and Gateway’s loss for tax purposes:
SERIES
Net Loss per Financial Statements
$ (345,647)
$ (366,648)
$ (467,796)
Equity in Loss of Project Partnerships for tax purposes
in excess of losses for financial statement purposes
(734,090)
(744,619)
(827,640)
Adjustments to convert March 31, fiscal year end
to December 31, taxable year end
27,581
(139,599)
232,618
Items Expensed for Financial Statement purposes
not expensed for Tax purposes:
Asset Management Fee
Amortization Expense
Impairment Expense
Other Adjustments
85,596
27,255
76,196
(28,978)
86,138
50,301
193,195
(22,042)
86,222
6,431
(24,185)
Gateway loss for tax purposes as of December 31
$ (892,087)
$ (943,274)
$ (994,350)
December 31, 2007
December 31, 2006
December 31, 2005
Federal Low Income Housing Tax Credits (Unaudited)
$ 0
$ 9,934
$ 84,568
The differences in the assets and liabilities of the Series for financial reporting purposes and tax reporting purposes for the year ended March 31, 2008 are as follows:
Financial
Reporting
Purposes
Tax
Reporting
Purposes
Differences
Investments in Local
Limited Partnerships
$ 284,147
$ (7,781,839)
$ 8,065,986
Other Assets
$ 365,929
$ 1,577,882
$ (1,211,953)
Liabilities
$ 880,008
$ 11,678
$ 868,330
NOTE 7 - TAXABLE INCOME (LOSS) (Continued):
The following is a reconciliation between net loss as described in the financial statements and Gateway’s loss for tax purposes:
SERIES
Net Loss per Financial Statements
$ (251,652)
$ (240,629)
$ (216,489)
Equity in Loss of Project Partnerships for tax purposes
in excess of losses for financial statement purposes
(786,382)
(852,613)
(928,195)
Adjustments to convert March 31, fiscal year end
to December 31, taxable year end
41,559
(8,485)
22,154
Additional Loss on Sale of Project Partnerships
for tax purposes
(68,000)
Items Expensed for Financial Statement purposes
not expensed for Tax purposes:
Asset Management Fee
Amortization Expense
Other Adjustments
89,020
12,821
(25,785)
89,592
20,740
(13,876)
89,605
1,950
(14,323)
Gateway loss for tax purposes as of December 31
$ (988,419)
$ (1,005,271)
$ (1,045,298)
December 31, 2007
December 31,2006
December 31, 2005
Federal Low Income Housing Tax Credits (Unaudited)
$ 0
$ 15,422
$ 170,591
The differences in the assets and liabilities of the Series for financial reporting purposes and tax reporting purposes for the year ended March 31, 2008 are as follows:
Financial
Reporting
Purposes
Tax
Reporting
Purposes
Differences
Investments in Local
Limited Partnerships
$ 296,532
$ (8,377,303)
$ 8,673,835
Other Assets
$ 328,591
$ 1,456,575
$ (1,127,984)
Liabilities
$ 1,027,682
$ 12,606
$ 1,015,076
NOTE 7 - TAXABLE INCOME (LOSS) (Continued):
The following is a reconciliation between net loss as described in the financial statements and Gateway’s loss for tax purposes:
SERIES
Net Loss per Financial Statements
$ (242,723)
$ (248,128)
$ (341,082)
Equity in Loss of Project Partnerships for tax purposes
in excess of losses for financial statement purposes
(469,803)
(417,301)
(389,575)
Adjustments to convert March 31, fiscal year end
to December 31, taxable year end
4,869
(135,479)
148,091
Items Expensed for Financial Statement purposes
not expensed for Tax purposes:
Asset Management Fee
Amortization Expense
Impairment Expense
Other Adjustments
49,068
12,053
(5,960)
49,353
19,451
127,532
(5,409)
49,357
1,846
(6,176)
Gateway loss for tax purposes as of December 31
$ (652,496)
$ (609,981)
$ (537,539)
December 31, 2007
December 31, 2006
December 31, 2005
Federal Low Income Housing Tax Credits (Unaudited)
$
$
$ 40,080
The differences in the assets and liabilities of the Series for financial reporting purposes and tax reporting purposes for the year ended March 31, 2008 are as follows:
Financial
Reporting
Purposes
Tax
Reporting
Purposes
Differences
Investments in Local
Limited Partnerships
$ 292,761
$ (3,591,076)
$ 3,883,837
Other Assets
$ 210,017
$ 971,196
$ (761,179)
Liabilities
$ 559,030
$ 7,296
$ 551,734
NOTE 7 - TAXABLE INCOME (LOSS) (Continued):
The following is a reconciliation between net loss as described in the financial statements and Gateway’s loss for tax purposes:
SERIES
Net Loss per Financial Statements
$ (561,574)
$ (261,712)
$ (355,932)
Equity in Loss of Project Partnerships for tax purposes
in excess of losses for financial statement purposes
(232,828)
(262,403)
(285,809)
Adjustments to convert March 31, fiscal year end
to December 31, taxable year end
335,884
(125,267)
181,059
Items Expensed for Financial Statement purposes
not expensed for Tax purposes:
Asset Management Fee
Amortization Expense
Impairment Expense
Other Adjustments
33,536
24,105
46,129
(3,311)
33,713
39,206
156,694
(2,562)
33,768
4,281
(1,062)
Gateway loss for tax purposes as of December 31
$ (358,059)
$ (422,331)
$ (423,695)
December 31, 2007
December 31, 2006
December 31, 2005
Federal Low Income Housing Tax Credits (Unaudited)
$
$
$ 48,806
The differences in the assets and liabilities of the Series for financial reporting purposes and tax reporting purposes for the year ended March 31, 2008 are as follows:
Financial
Reporting
Purposes
Tax
Reporting
Purposes
Differences
Investments in Local
Limited Partnerships
$ 672,563
$ (1,321,560)
$ 1,994,123
Other Assets
$ 199,448
$ 812,205
$ (612,757)
Liabilities
$ 145,423
$ 4,869
$ 140,554
NOTE 7 - TAXABLE INCOME (LOSS) (Continued):
The following is a reconciliation between net loss as described in the financial statements and Gateway’s loss for tax purposes:
SERIES
Net Loss per Financial Statements
$ (628,777)
$ (470,714)
$ (776,165)
Equity in Loss of Project Partnerships for tax purposes
in excess of losses for financial statement purposes
(198,370)
(172,636)
(216,021)
Adjustments to convert March 31, fiscal year end
to December 31, taxable year end
113,606
(276,160)
632,332
Items Expensed for Financial Statement purposes
not expensed for Tax purposes:
Asset Management Fee
Amortization Expense
Impairment Expense
Other Adjustments
28,620
33,497
345,321
(2,782)
11,508
54,186
600,802
(3,382)
114,970
5,725
(2,785)
Gateway loss for tax purposes as of December 31
$ (308,885)
$ (256,396)
$ (241,944)
December 31, 2007
December 31, 2006
December 31, 2005
Federal Low Income Housing Tax Credits (Unaudited)
$
$ 43,946
$ 570,762
The differences in the assets and liabilities of the Series for financial reporting purposes and tax reporting purposes for the year ended March 31, 2008 are as follows:
Financial
Reporting
Purposes
Tax
Reporting
Purposes
Differences
Investments in Local
Limited Partnerships
$ 935,152
$ 1,000,537
$ (65,385)
Other Assets
$ 285,445
$ 750,168
$ (464,723)
Liabilities
$ 62,077
$ 4,125
$ 57,952
NOTE 7 - TAXABLE INCOME (LOSS) (Continued):
The following is a reconciliation between net loss as described in the financial statements and Gateway’s loss for tax purposes:
TOTAL SERIES 7 -11
Net Loss per Financial Statements
$ (2,030,373)
$ (1,587,831)
$ (2,157,464)
Equity in Loss of Project Partnerships for tax purposes
in excess of losses for financial statement purposes
(2,421,473)
(2,449,572)
(2,647,240)
Adjustments to convert March 31, fiscal year end
to December 31, taxable year end
523,499
(684,990)
1,216,254
Additional Loss on Sale of Project Partnerships
for tax purposes
(68,000)
Items Expensed for Financial Statement purposes
not expensed for Tax purposes:
Asset Management Fee
Amortization Expense
Impairment Expense
Other Adjustments
285,841
109,731
467,646
(66,816)
270,304
183,884
1,078,223
(47,271)
373,921
20,233
(48,531)
Gateway loss for tax purposes as of December 31
$ (3,199,945)
$ (3,237,253)
$ (3,242,827)
The difference in the total value of Gateway’s Investments in Project Partnerships is approximately $8,065,986 higher for Series 7, $8,673,835 higher for Series 8, $3,883,837 higher for Series 9, $1,994,123 higher for Series 10 and $65,385 lower for Series 11 for financial reporting purposes than for tax return purposes because (i) there were depreciation differences between financial reporting purposes and tax return purposes and (ii) certain expenses are not deductible for tax return purposes.
The differences in the assets and liabilities of Gateway for financial reporting purposes and tax reporting purposes for the year ended March 31, 2008 are as follows:
Financial
Reporting
Purposes
Tax
Reporting
Purposes
Differences
Investments in Local
Limited Partnerships
$ 2,481,155
$ (20,071,241)
$ 22,552,396
Other Assets
$ 1,389,430
$ 5,568,027
$ (4,178,597)
Liabilities
$ 2,674,220
$ 40,574
$ 2,633,646
NOTE 8 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
NOTE 8 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (Continued):
NOTE 8 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (Continued):
Donald W. Causey & Associates, P.C.
Walnut Street-P.O. Box 775
Gadsden, AL 35902
PHONE: 256-543-3707
FAX: 256-543-9800
INDEPENDENT AUDITORS' REPORT
To the Partners
Lakeshore II, Ltd.
Tuskegee, Alabama
We have audited the accompanying balance sheets of Lakeshore II, Ltd., a limited partnership, RHS Project No: 01-044-631056927 as of December 31, 2005 and 2004, and the related statements of operations, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted the audits in accordance with standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States, the U.S. Department of Agriculture, Farmers Home Administration Audit Program, and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that the audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lakeshore II, Ltd., RHS Project No: 01-044-631056927 as of December 31, 2005 and 2004, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.
The audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 11 through 14 is presented for purposes of additional analysis and is not a required part of the basic financial statements. The supplemental information presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA 1930-8) Parts I and II for the years ended December 31, 2005 and 2004, is presented for purposes of complying with the requirements of the Rural Housing Services and is also not a required part of the basic financial statements. Such information has been subjected to the audit procedures applied in the audit of the basic financial statements and, in our opinion is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued a report dated February 21, 2006 on our consideration of Lakeshore II, Ltd.’s, internal control over financial reporting and on our tests of its compliance with certain provisions of laws and regulations. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. However, the partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included only the consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the partnership’s internal control over financial reporting. Accordingly, we express no such opinion.
/s/ Donald W. Causey & Associates, P.C.
Certified Public Accountants
Gadsden, Alabama
February 21, 2006
Donald W. Causey & Associates, P.C.
Walnut Street-P.O. Box 775
Gadsden, AL 35902
PHONE: 256-543-3707
FAX: 256-543-9800
INDEPENDENT AUDITORS' REPORT
To the Partners
Skyview Apartments, Ltd.
Troy, Alabama
We have audited the accompanying balance sheets of Skyview Apartments, Ltd., a limited partnership, as of December 31, 2005 and 2004, and the related statements of operations, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted the audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that the audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Skyview Apartments, Ltd., as of December 31, 2005 and 2004, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.
The audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 10 and 11 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the audit procedures applied in the audit of the basic financial statements and, in our opinion is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ Donald W. Causey & Associates, P.C.
Certified Public Accountants
Gadsden, Alabama
February 6, 2006
Donald W. Causey & Associates, P.C.
Walnut Street-P.O. Box 775
Gadsden, AL 35902
PHONE: 256-543-3707
FAX: 256-543-9800
INDEPENDENT AUDITORS' REPORT
To the Partners
Meadowview Apartments, Ltd.
Greenville, Alabama
We have audited the accompanying balance sheets of Meadowview Apartments, Ltd., a limited partnership, as of December 31, 2005 and 2004, and the related statements of operations, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted the audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that the audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Meadowview Apartments, Ltd., a limited partnership, as of December 31, 2005 and 2004, and the results of its operations, changes in partners capital and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 9 and 10 is presented for the purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements, and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ Donald W. Causey and Associates, P.C.
Certified Public Accountant
Gadsden, Alabama
February 23, 2006
Donald W. Causey & Associates, P.C.
Walnut Street-P.O. Box 775
Gadsden, AL 35902
PHONE: 256-543-3707
FAX: 256-543-9800
INDEPENDENT AUDITORS' REPORT
To the Partners
Applegate Apartments, Ltd.
Florence, Alabama
We have audited the accompanying balance sheets of Applegate Apartments, Ltd., a limited partnership, as of December 31, 2005 and 2004, and the related statements of operations, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted the audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that the audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Applegate Apartments, Ltd., as of December 31, 2005 and 2004, and the results of its operations, changes in partners’ capital and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.
The audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 10 and 11 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the audit procedures applied in the audit of the basic financial statements and, in our opinion is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ Donald W. Causey & Associates, P.C.
Certified Public Accountants
Gadsden, Alabama
February 20, 2006
Donald W. Causey & Associates, P.C.
Walnut Street-P.O. Box 775
Gadsden, AL 35902
PHONE: 256-543-3707
FAX: 256-543-9800
INDEPENDENT AUDITORS' REPORT
To the Partners
Heatherwood Apartments, Ltd.
Alexander City, Alabama
We have audited the accompanying balance sheets of Heatherwood Apartments, Ltd., a limited partnership, as of December 31, 2005 and 2004, and the related statements of operations, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted the audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that the audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Heatherwood Apartments, Ltd., as of December 31, 2005 and 2004, and the results of its operations, changes in partners’ capital and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 9 and 10 is presented for the purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements, and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ Donald W. Causey & Associates, P.C.
Certified Public Accountants
Gadsden, Alabama
February 28, 2006
Item 9.
Item 9. Changes in and disagreements with Accountants on Accounting and Financial Disclosures
None
Item 9A.
Item 9A. Controls and Procedures
Disclosure controls are procedures designed to ensure that information required to be disclosed in Gateway's reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, as Gateway's are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Under the supervision and with the participation of the Managing General Partner’s management, including the Chief Executive Officer and Chief Financial Officer, Gateway has evaluated the effectiveness of its disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective. There were no changes in Gateway’s internal control over financial reporting during the year ended March 31, 2008 that have materially affected, or are reasonably likely to materially affect, Gateway’s internal control over financial reporting.
REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Gateway’s management is responsible for establishing and maintaining adequate internal control over financial reporting for Gateway. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of Gateway’s financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect Gateway’s transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of its financial statements; providing reasonable assurance that receipts and expenditures of Gateway’s assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of Gateway’s assets that could have a material effect on Gateway’s financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of Gateway’s financial statements would be prevented or detected.
Management conducted an evaluation of the effectiveness of Gateway’s internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management concluded that Gateway’s internal control over financial reporting was effective as of March 31, 2008.
Item 9a(T). Controls and Procedures
Not applicable to Gateway’s annual report for fiscal year ended March 31, 2008.
Item 9B.
Item 9B. Other Information
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
Gateway has no directors or executive officers. Gateway's affairs are managed and controlled by the Managing General Partner. Certain information concerning the directors and certain officers of the Managing General Partner are set forth below.
Raymond James Tax Credit Funds, Inc. - Managing General Partner
Raymond James Tax Credit Funds, Inc. is the Managing General Partner and is responsible for decisions pertaining to the acquisition and sale of Gateway's interests in the Project Partnerships and other matters related to the business operations of Gateway. Certain officers and the directors of the Managing General Partner are as follows:
Ronald M. Diner, age 64, is President and a Director. He is a Senior Vice President of Raymond James & Associates, Inc., with whom he has been employed since June 1983. Mr. Diner received an MBA degree from Columbia University (1968) and a BS degree from Trinity College (1966). Prior to joining Raymond James & Associates, Inc., he managed the broker-dealer activities of Pittway Real Estate, Inc., a real estate development firm. He was previously a loan officer at Marine Midland Realty Credit Corp., and spent three years with Common, Dann & Co., a New York regional investment firm. He has served as a member of the Board of Directors of the Council for Rural Housing and Development, a national organization of developers, managers and syndicators of properties developed under the RECD Section 515 program, and is a member of the Board of Directors of the Florida Council for Rural Housing and Development. Mr. Diner has been a speaker and panel member at state and national seminars relating to the low-income housing credit.
J. Davenport Mosby III, age 52, is a Vice President and a Director. He is a Senior Managing Director of Raymond James & Associates, Inc. which he joined in 1982. Mr. Mosby received an MBA from the Harvard Business School (1982). He graduated magna cum laude with a BA from Vanderbilt University where he was elected to Phi Beta Kappa.
Raymond James Tax Credit Funds, Inc. is a wholly owned subsidiary of Raymond James Financial, Inc. (“RJF”). RJF has adopted a Business Ethics and Corporate Policy that is applicable to the officers and employees of Raymond James Tax Credit Funds, Inc., the Managing General Partner of the of Gateway. That policy is posted on RJF’s Internet website at http://www.raymondjames.com under “About Our Company” --- Investor Relations --- Corporate Governance --- Employee Code of Ethics.
Raymond James Partners, Inc. -
Raymond James Partners, Inc. was formed to act as the general partner, with affiliated corporations, in limited partnerships sponsored by Raymond James Financial, Inc.
Information regarding the officers and directors of Raymond James Partners, Inc. is included on page 68 of the Prospectus under the section captioned “Management” (consisting of pages 66 through 69 of the Prospectus) which is incorporated herein by reference.
Item 11.
Item 11. Executive Compensation
Gateway has no directors or officers.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Neither of the General Partners own any units of the outstanding securities of Gateway as of March 31, 2008. Ronald M. Diner, President of Raymond James Tax Credit Funds, Inc. owns 5 units of Series 7. None of the other directors and officers own any units of the outstanding securities of Gateway as of March 31, 2008.
Gateway is a Limited Partnership and therefore does not have voting shares of stock. To the knowledge of Gateway, no person owns of record or beneficially, more than 5% of Gateway's outstanding units.
Item 13.
Item 13. Certain Relationships and Related Transactions and Director Independence
Gateway has no officers or directors. However, under the terms of the public offering, various kinds of compensation and fees are payable to the General Partners and its affiliates during the organization and operations of Gateway. Additionally, the General Partners will receive distributions from Gateway if there is cash available for distribution or residual proceeds as defined in the Agreement. The amounts and kinds of compensation and fees are described on pages 24 to 26 of the Prospectus under the caption “Management Compensation”, which is incorporated herein by reference.
The Payable to General Partners primarily represents the asset management fees and general and administrative expenses owed to the General Partners at the end of the period. It is unsecured, due on demand and, in accordance with the Agreement, non-interest bearing. Within the next 12 months, the Managing General Partner does not intend to demand payment on the portion of Asset Management Fees payable classified as long-term on the Balance Sheet.
For the years ended March 31, 2008, 2007, and 2006 the General Partners and affiliates are entitled to compensation and reimbursement for costs and expenses incurred by Gateway as follows:
Asset Management Fee - The Managing General Partner is entitled to receive an annual asset management fee equal to the greater of (i) $2,000 for each limited partnership in which Gateway invests, or (ii) 0.275% of Gateway's gross proceeds from the sale of limited partnership interests. In either event (i) or (ii), the maximum amount may not exceed 0.2% of the aggregate cost (Gateway's capital contribution plus Gateway's share of the Properties' mortgage) of Gateway's interest in properties 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.
Series
$ 85,596
$ 85,926
$ 86,447
Series
89,020
89,370
89,908
Series
49,068
49,242
49,509
Series
33,536
33,643
33,819
Series
28,699
27,989
28,021
Total
$ 285,919
$ 286,170
$ 287,704
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
$ 124,429
$ 109,100
$ 84,526
Series
136,878
120,278
93,195
Series
76,571
67,132
52,016
Series
47,857
41,958
32,510
Series
38,286
33,565
26,008
Total
$ 424,021
$ 372,033
$ 288,255
Total unpaid asset management fees and administrative expenses payable to the General Partners, which are included on the Balance Sheet as of March 31, 2008 and 2007 are as follows:
March 31,
March 31,
Series
$ 880,008
$ 790,609
Series
959,682
824,825
Series
559,030
507,802
Series
145,423
110,514
Series
62,077
34,115
Total
$ 2,606,220
$ 2,267,865
Item 14.
Item 14. Principal Accounting Fees & Services
Audit Fees
The aggregate fees incurred by Gateway’s principal accounting firm, Reznick Group, P.C., for professional services rendered for the audit of the annual financial statements and review of financial statements included in Gateway’s quarterly report on Form 10-Q was $74,500 and $82,000 for the years ended March 31, 2008 and 2007, respectively. The aggregate fees billed by Gateway’s former principal accounting firm, Spence, Marston, Bunch, Morris and Co., totaled $2,000 for each of the years ended March 31, 2008 and 2007 for services pertaining to prior years audit reports.
Tax Fees
During fiscal 2008 and 2007, Spence, Marston, Bunch, Morris and Co. was engaged to prepare Gateway’s federal tax return, for which they billed $9,000 for each of the years ended 2008 and 2007.
Other Fees
The two members of Raymond James Tax Credit Funds, Inc. Board of Directors, Ronald M. Diner and J. Davenport Mosby III also serve as the members of the Audit Committee on behalf of Gateway. The audit committee charter requires that the committee approve the engagement of the principal accounting firm prior to the rendering of any audit or non-audit services. During fiscal 2008, 100% of the audit related and other services and 100% of the tax services were pre-approved by the Audit Committee.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
a. (1) Financial Statements
(2) Financial Statement Schedules -
Schedule III - Real Estate and Accumulated Depreciation of Property Owned by Project Partnerships
Schedule IV - Mortgage loans on real estate
All other schedules are omitted because they are not applicable or not required, or because the required information is shown either in the financial
statements or the notes thereto.
(3)
Exhibit Listing
Exhibit
Number Description
3.1
Amended Certificate of Limited Partnership of Gateway Tax Credit Fund III, Ltd. (Filed as an Exhibit to Registration Statement on Form S-11, File No. 33-44238, and incorporated by reference.)
4.1
The Form of Partnership Agreement of the Partnership (included as Exhibit “A” to the Prospectus, File No. 33-44238, and incorporated herein by reference.)
31.1 Certification required by Rule 15d-14(a). (Filed herewith.)
31.2 Certification required by Rule 15d-14(a). (Filed herewith.)
32 Certification required by Rule 15d-14(b). (Filed herewith.)
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
SERIES
Apartment Properties
# of
Mortgage Loan
Partnership
Location
Units
Balance
Nottingham
Pisgah, AL
555,257
Cedar Hollow
Waterloo, NE
738,636
Sunrise
Mission, SD
1,960,497
Mountain City
Mountain City, TN
1,277,407
Burbank
Falls City, NE
783,132
Washington
Bloomfield, NE
777,519
BrookStone
McCaysville, GA
1,156,312
Tazewell
New Tazewell, TN
1,357,971
N. Irvine
Irvine, KY
768,725
Horton
Horton, KS
746,093
Manchester
Manchester, GA
1,163,800
Waynesboro
Waynesboro, GA
649,613
Lakeland II
Lakeland, GA
807,821
Mt. Vernon
Mt. Vernon, GA
715,542
Meadow Run
Dawson, GA
1,379,973
Spring Creek II
Quitman, GA
645,324
Warm Springs
Warm Springs, GA
654,677
Blue Ridge
Blue Ridge, GA
1,062,541
Walnut
Elk Point, SD
797,828
Pioneer
Mountain View, AR
1,176,568
Dilley
Dilley, TX
705,102
Elsa
Elsa, TX
1,006,354
Clinch View
Gate City, VA
1,410,511
Jamestown
Jamestown, TN
1,183,906
Leander
Leander, TX
889,125
Louisa Sr.
Louisa, KY
1,153,521
Orchard Commons
Crab Orchard, KY
317,155
Vardaman
Vardaman, MS
709,499
Heritage Park
Paze, AZ
1,208,245
BrooksHollow
Jasper, GA
1,141,476
Cavalry Crossing
Ft. Scott, KS
1,378,926
Carson City
Carson City, KS
765,168
Matteson
Capa, KS
739,960
Pembroke
Pembroke, KY
493,224
Robynwood
Cynthiana, KY
746,848
Atoka
Atoka, OK
651,478
Coalgate
Coalgate, OK
651,674
Hill Creek
West Blocton, AL
750,073
Cardinal
Mountain Home. AR
108,337
Total Series 7
1,195
$ 35,185,818
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
SERIES
Apartment Properties
# of
Mortgage Loan
Partnership
Location
Units
Balance
Purdy
Purdy, MO
444,795
Galena
Galena, KS
590,308
Antlers
Antlers, OK
611,320
Holdenville
Holdenville, OK
696,045
Wetumka
Wetumka, OK
630,622
Mariners Cove
Marine City, MI
1,006,119
Mariners Cove Sr.
Marine City, MI
779,234
Antlers
Antlers, OK
1,058,398
Bentonville
Bentonville, AR
474,029
Deerpoint
Elgin, AL
712,323
Aurora
Aurora, MO
706,111
Baxter
Baxter Springs, KS
411,918
Arbor Gate
Bridgeport, AL
729,740
Timber Ridge
Collinsville, AL
713,019
Concordia Sr.
Concordia, KS
660,721
Mountainburg
Mountainburg, AR
687,362
Lincoln
Pierre, SD
866,151
Fox Ridge
Russellville, AL
721,183
Meadow View
Bridgeport, NE
573,758
Sheridan
Auburn, NE
588,680
Grand Isle
Grand Isle, ME
917,820
Meadowview
Van Buren, AR
720,015
Taylor
Taylor, TX
1,204,950
Brookwood
Gainesboro, TN
1,416,099
Pleasant Valley
Lynchburg, TN
1,067,348
Reelfoot
Ridgely, TN
630,984
River Rest
Newport, TN
1,115,153
Kirskville
Kirksville, MO
664,838
Cimmaron
Arco, ID
802,967
Kenton
Kenton, OH
1,389,381
Lovingston
Lovingston, VA
2,154,756
Pontotoc
Pontotoc, MS
1,072,580
So. Brenchley
Rexburg, ID
1,203,277
Hustonville
Hustonville, KY
504,093
Northpoint
Jackson, KY
870,614
Brooks Field
Louisville, GA
929,311
Brooks Lane
Clayton, GA
1,074,427
Brooks Point
Dahlonega, GA
1,333,076
Brooks Run
Jasper, GA
739,190
Logan Heights
Russellville, KY
762,160
Lakeshore
Tuskegee, AL
1,124,452
Cottondale
Cottondale, FL
745,180
Total Series 8
1,175
$ 36,104,507
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
SERIES
Apartment Properties
# of
Mortgage Loan
Partnership
Location
Units
Balance
Jay
Jay, OK
632,248
Boxwood
Lexington, TX
594,313
Stilwell
Stilwell, OK
448,511
Arbor Trace
Lake Park, GA
720,309
Arbor Trace 2
Lake Park, GA
1,418,848
Omega
Omega, GA
1,103,838
Cornell
Watertown, SD
896,084
Elm Creek
Pierre, SD
927,292
Marionville
Marionville, MO
545,943
Lamar
Lamar, AR
691,072
Mt. Glen
Heppner, OR
799,801
Centreville
Centreville, AL
768,053
Skyview
Troy, AL
1,104,374
Sycamore
Coffeyville, KS
1,377,167
Bradford
Cumberland, KY
770,088
Cedar Lane
London, KY
703,819
Stanton
Stanton, KY
778,508
Abernathy
Abernathy, TX
599,743
Pembroke
Pembroke, KY
776,224
Meadowview
Greenville, AL
643,045
Town Branch
Mt. Vernon, KY
745,904
Fox Run
Ragland, AL
752,465
Maple Street
Emporium, PA
1,329,626
Manchester
Manchester, GA
575,105
Total Series 9
$ 19,702,380
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
SERIES
Apartment Properties
# of
Mortgage Loan
Partnership
Location
Units
Balance
Redstone
Challis, ID
816,982
Albany
Albany, KY
747,391
Oak Terrace
Bonifay, FL
525,208
Wellshill
West Liberty, KY
1,054,009
Applegate
Florence, AL
1,114,105
Heatherwood
Alexander City, AL
862,003
Peachtree
Gaffney, SC
1,078,477
Donna
Donna, TX
1,378,145
Wellsville
Wellsville, NY
1,006,711
Tecumseh
Tecumseh, NE
865,031
Clay City
Clay City, KY
789,571
Irvine West
Irvine, KY
788,239
New Castle
New Castle, KY
781,816
Stigler
Stigler, OK
576,524
Courtyard
Huron, SD
623,424
Total Series 10
$ 13,007,636
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
SERIES
Apartment Properties
# of
Mortgage Loan
Partnership
Location
Units
Balance
Homestead
Pinetop, AZ
1,240,832
Mountain Oak
Collinsville, AL
651,176
Eloy
Eloy, AZ
632,905
Gila Bend
Gila Bend, AZ
1,619,844
Creekstone
Dallas, GA
576,614
Tifton
Tifton, GA
754,909
Cass Towne
Cartersville, GA
Warsaw
Warsaw, VA
2,579,432
Royston
Royston, GA
723,233
Red Bud
Mokane, MO
232,898
Cardinal
Mountain Home, AR
70,679
Parsons
Parsons, KS
1,066,892
Total Series 11
$ 10,149,414
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
NOTES TO SCHEDULE III
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
NOTES TO SCHEDULE III
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY OWNED BY PROJECT PARTNERSHIPS INVESTED IN
AS OF DECEMBER 31, 2007
NOTES TO SCHEDULE III
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
AS OF DECEMBER 31, 2007
SERIES
PARTNERSHIP
# OF UNITS
BALANCE
INTEREST RATE
MONTHLY DEBT SERVICE
TERM (YEARS)
Nottingham
$ 555,257
7.75%
4,182
Cedar Hollow
738,636
7.75%
3,128
Sunrise
1,960,497
7.25%
9,226
Mountain City
1,277,407
7.75%
5,399
Burbank
783,132
8.25%
2,990
Washington
777,519
8.25%
2,923
BrookStone
1,156,312
6.50%
6,491
Tazewell
1,357,971
7.25%
6,463
N. Irvine
768,725
7.75%
3,164
Horton
746,093
7.75%
2,845
Manchester
1,163,800
6.50%
6,417
Waynesboro
649,613
6.50%
3,398
Lakeland II
807,821
7.25%
3,800
Mt. Vernon
715,542
6.50%
3,899
Meadow Run
1,379,973
6.50%
7,564
Spring Creek II
645,324
6.50%
3,623
Warm Springs
654,677
7.25%
2,775
Blue Ridge
1,062,541
7.25%
4,869
Walnut
797,828
7.75%
3,401
Pioneer
1,176,568
8.25%
4,524
Dilley
705,102
8.25%
2,650
Elsa
1,006,354
7.75%
4,347
Clinch View
1,410,511
8.75%
7,509
Jamestown
1,183,906
7.25%
5,565
Leander
889,125
7.75%
3,506
Louisa Sr.
1,153,521
7.25%
6,061
Orchard Commons
317,155
7.75%
5,732
Vardaman
709,499
7.25%
3,006
Heritage Park
1,208,245
7.75%
5,077
BrooksHollow
1,141,476
6.50%
6,294
Cavalry Crossing
1,378,926
7.75%
5,676
Carson City
765,168
7.25%
3,500
Matteson
739,960
7.25%
3,500
Pembroke
493,224
7.25%
2,951
Robynwood
746,848
7.25%
5,251
Atoka
651,478
7.25%
3,917
Coalgate
651,674
7.25%
3,793
Hill Creek
750,073
6.50%
3,830
Cardinal
108,337
6.50%
5,200
TOTAL SERIES 7
1,195
$ 35,185,818
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
AS OF DECEMBER 31, 2007
SERIES
PARTNERSHIP
# OF UNITS
BALANCE
INTEREST RATE
MONTHLY DEBT SERVICE
TERM (YEARS)
Purdy
$ 444,795
7.75%
2,285
Galena
590,308
7.25%
2,776
Antlers
611,320
7.25%
4,085
Holdenville
696,045
6.50%
4,330
Wetumka
630,622
6.50%
4,314
Mariners Cove
1,006,119
7.25%
4,600
Mariners Cove Sr.
779,234
7.25%
3,500
Antlers
1,058,398
7.25%
4,619
Bentonville
474,029
7.75%
14,430
Deerpoint
712,323
7.75%
6,238
Aurora
706,111
7.25%
3,236
Baxter
411,918
6.50%
2,720
Arbor Gate
729,740
6.50%
4,099
Timber Ridge
713,019
7.25%
3,446
Concordia Sr.
660,721
6.50%
3,350
Mountainburg
687,362
6.50%
3,824
Lincoln
866,151
8.25%
3,351
Fox Ridge
721,183
7.25%
3,398
Meadow View
573,758
7.25%
2,683
Sheridan
588,680
8.25%
3,211
Grand Isle
917,820
8.25%
8,875
Meadowview
720,015
7.25%
7,575
Taylor
1,204,950
7.50%
6,644
Brookwood
1,416,099
6.50%
7,860
Pleasant Valley
1,067,348
7.25%
4,893
Reelfoot
630,984
7.25%
3,892
River Rest
1,115,153
7.25%
4,791
Kirskville
664,838
7.25%
2,591
Cimmaron
802,967
10.75%
4,428
Kenton
1,389,381
7.25%
6,044
Lovingston
2,154,756
7.00%
10,920
Pontotoc
1,072,580
7.25%
4,490
So. Brenchley
1,203,277
7.25%
5,200
Hustonville
504,093
6.50%
3,187
Northpoint
870,614
7.25%
4,112
Brooks Field
929,311
7.25%
4,004
Brooks Lane
1,074,427
7.25%
4,297
Brooks Point
1,333,076
7.25%
4,833
Brooks Run
739,190
7.25%
2,975
Logan Heights
762,160
7.25%
3,072
Lakeshore
1,124,452
7.75%
4,147
Cottondale
745,180
7.75%
2,711
TOTAL SERIES 8
1,175
$ 36,104,507
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
AS OF DECEMBER 31, 2007
SERIES
PARTNERSHIP
# OF UNITS
BALANCE
INTEREST RATE
MONTHLY DEBT SERVICE
TERM (YEARS)
Jay
$ 632,248
7.25%
2,851
Boxwood
594,313
6.50%
3,894
Stilwell
448,511
7.25%
2,728
Arbor Trace
720,309
7.25%
3,309
Arbor Trace 2
1,418,848
7.25%
6,157
Omega
1,103,838
7.25%
4,679
Cornell
896,084
7.25%
4,135
Elm Creek
927,292
7.25%
4,223
Marionville
545,943
6.50%
2,974
Lamar
691,072
7.25%
11,480
Mt. Glen
799,801
6.50%
4,344
Centreville
768,053
7.25%
3,340
Skyview
1,104,374
7.25%
4,771
Sycamore
1,377,167
7.25%
5,914
Bradford
770,088
7.03%
3,205
Cedar Lane
703,819
6.50%
5,465
Stanton
778,508
7.25%
3,892
Abernathy
599,743
6.50%
3,737
Pembroke
776,224
7.25%
3,495
Meadowview
643,045
0.50%
2,162
Town Branch
745,904
7.25%
4,347
Fox Run
752,465
6.50%
3,685
Maple Street
1,329,626
7.25%
5,421
Manchester
575,105
7.25%
2,438
TOTAL SERIES 9
$ 19,702,380
GATEWAY TAX CREDIT FUND III LTD.
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
AS OF DECEMBER 31, 2007
SERIES
PARTNERSHIP
# OF UNITS
BALANCE
INTEREST RATE
MONTHLY DEBT SERVICE
TERM (YEARS)
Redstone
$ 816,982
6.50%
4,505
Albany
747,391
6.50%
4,992
Oak Terrace
525,208
6.50%
2,861
Wellshill
1,054,009
7.25%
4,437
Applegate
1,114,105
0.50%
Heatherwood
862,003
0.50%
Peachtree
1,078,477
7.25%
4,608
Donna
1,378,145
6.50%
7,509
Wellsville
1,006,711
6.50%
8,231
Tecumseh
865,031
7.25%
3,531
Clay City
789,571
7.25%
3,619
Irvine West
788,239
7.25%
3,361
New Castle
781,816
7.25%
5,131
Stigler
576,524
7.25%
3,813
Courtyard
623,424
6.50%
2,386
TOTAL SERIES 10
$ 13,007,636
SERIES
PARTNERSHIP
# OF UNITS
BALANCE
INTEREST RATE
MONTHLY DEBT SERVICE
TERM (YEARS)
Homestead
$ 1,240,832
6.50%
6,408
Mountain Oak
651,176
8.00%
4,666
Eloy
632,905
6.00%
2,109
Gila Bend
1,619,844
8.00%
3,070
Creekstone
576,614
11.00%
56,427
Tifton
754,909
0.00%
24,929
Cass Towne
3.00%
17,000
Warsaw
2,579,432
6.50%
12,984
Royston
723,233
6.75%
3,009
Red Bud
232,898
7.25%
Cardinal
70,679
6.50%
3,392
Parsons
1,066,892
8.00%
3,943
TOTAL SERIES 11
$ 10,149,414
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 III, LTD.
(A Florida Limited Partnership)
By: Raymond James Tax Credit Funds, Inc.
Date: July 11, 2008 By:/s/ Ronald M. Diner
Ronald M. Diner
President, Director
Date: July 11, 2008 By:/s/ J. Davenport Mosby III
J. Davenport Mosby III
Director
Date: July 11, 2008 By:/s/ Jonathan Oorlog
Jonathan Oorlog
Vice President and Chief Financial Officer
Date: July 11, 2008 By:/s/ Sandra C. Humphreys
Sandra C. Humphreys
Secretary and Treasurer