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|                                                                                           |   |                                                                                                                                                                                                                     | Page           |
|------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|
| Independent Auditors' Report                                                                   |   |                                                                                                                                                                                                                     | 1              |
|                                                                                           |   |                                                                                                                                                                                                                     |           |
| Financial Statements:                                                                          |   |                                                                                                                                                                                                                     |           |
| Balance Sheets                                                                                 |   |                                                                                                                                                                                                                     |           |
| December 31,2006 and 2005                                                                      |   |                                                                                                                                                                                                                     | 2-3            |
|                                                                                           |   |                                                                                                                                                                                                                     |           |
| Statements of Income                                                                           |   |                                                                                                                                                                                                                     |           |
| For The Years Ended December 31, 2006 and 2005                                                 |   |                                                                                                                                                                                                                     | 4              |
|                                                                                           |   |                                                                                                                                                                                                                     |           |
| Statements of Partners' Capital                                                                |   |                                                                                                                                                                                                                     |           |
| For The Years Ended December 31, 2006 and 2005                                                 |   |                                                                                                                                                                                  | 5              |
|                                                                                           |   |                                                                                                                                                                                                                     |           |
| Statements of Cash Flows                                                                       |   |                                                                                                                                                                                                                     |           |
| For The Years Ended December 31, 2006 and 2005                                                 |   |                                      | 6              |
|                                                                                           |   |                                                                                                                                                                                                                     |           |
|            Notes to the Financial Statements |   |                                                                                                                                                                                                                     | 7-12      |
|                                                                                           |   |                                                                                                                                                                                                                     |           |
| Other information:                                                                             |   |                                                                                                                                                                                                                     |           |
|         Partner Certification                               |   |                                                                                                                                                                                                                     | 13   |

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|                                          |   | 2006   |      |   | 2005   |   |
|-----------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT ASSETS                                |   |   |      |   |   |   |
| Cash – Operating                        |   | $      | 10,497    |   |   | $      | 1,388 |   |
| Subsidy receivable                            |   |   | -         |   |   |   | 3,447 |   |
| Rent receivable                               |   |   | 4,679     |   |   |   | 3,841 |   |
| Miscellaneous receivables                     |   |   | 273       |   |   |   | 348 |   |
| Prepaid expenses                              |   |   | 323       |   |   |   | 302 |   |
|                                          |   |   |      |   |   |   |   |   |
| TOTAL CURRENT ASSETS                          |   |   | 15,772    |   |   |   | 9,326 |   |
|                                          |   |   |      |   |   |   |   |   |
| RESTRICTED DEPOSITS AND FUNDED RESERVES       |   |   |      |   |   |   |   |   |
| Tenants' security deposits                    |   |   | 9,715     |   |   |   | 8,352 |   |
| Replacement reserve                           |   |   | 36,213    |   |   |   | 37,524 |   |
| Taxes and insurance escrow                    |   |   | 19,454    |   |   |   | 16,062 |   |
|                                          |   |   |      |   |   |   |   |   |
| TOTAL RESTRICTED DEPOSITS AND FUNDED RESERVES |   |   | 65,382    |   |   |   | 61,938 |   |
|                                          |   |   |      |   |   |   |   |   |
| PROPERTY AND EQUIPMENT                        |   |   |      |   |   |   |   |   |
| Land                                          |   |   | 40,000    |   |   |   | 40,000 |   |
| Buildings                                     |   |   | 412,893   |   |   |   | 412,893 |   |
| Equipment                                     |   |   | 3,441     |   |   |   | 3,441 |   |
| Building - Rehab                              |   |   | 640,256   |   |   |   | 640,256 |   |
| Carpeting and appliances                      |   |   | 74,181    |   |   |   | 66,250 |   |
| Carpeting and appliances - Rehab              |   |   | 55,733    |   |   |   | 55,733 |   |
| Roads/walks and landscaping - Rehab           |   |   | 30,351    |   |   |   | 30,351 |   |
|                                          |   |   | 1,256,855 |   |   |   | 1,248,924 |   |
| Less accumulated depreciation                 |   |   | 363,452   |   |   |   | 327,870 |   |
|                                          |   |   |      |   |   |   |   |   |
| PROPERTY AND EQUIPMENT - NET                  |   |   | 893,403   |   |   |   | 921,054 |   |
|                                          |   |   |      |   |   |   |   |   |
|                                          |   | $      | 974,557   |   |   | $      | 992,318 |   |

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|                                       |   | 2006   |    |   | 2005   |   |
|--------------------------------------------|--------|--------|---------|--------|--------|--------|
| CURRENT LIABILITIES                        |   |   |    |   |   |   |
| Current portion of mortgages payable       |   | $      | 4,002   |   |   | $      | 3,742 |   |
| Accounts payable                           |   |   | 2,710   |   |   |   | 3,094 |   |
| Deferred rent                              |   |   | -       |   |   |   | 27 |   |
| Developers' fee payable                    |   |   | 13,181  |   |   |   | 13,181 |   |
|                                       |   |   |    |   |   |   |   |   |
| TOTAL CURRENT LIABILITIES                  |   |   | 19,893  |   |   |   | 20,044 |   |
|                                       |   |   |    |   |   |   |   |   |
| TENANTS' SECURITY DEPOSITS (CONTRA)        |   |   | 9,715   |   |   |   | 8,352 |   |
|                                       |   |   |    |   |   |   |   |   |
| LONG-TERM LIABILITIES                      |   |   |    |   |   |   |   |   |
| Mortgages payable - Net of current portion |   |   | 867,087 |   |   |   | 871,088 |   |
|                                       |   |   |    |   |   |   |   |   |
| TOTAL LIABILITIES                          |   |   | 896,695 |   |   |   | 899,484 |   |
|                                       |   |   |    |   |   |   |   |   |
| PARTNERS' CAPITAL                          |   |   | 77,862  |   |   |   | 92,834 |   |
|                                       |   |   |    |   |   |   |   |   |
|                                       |   | $      | 974,557 |   |   | $      | 992,318 |   |

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|                                   |   | 2006   |    |   | 2005   |   |
|----------------------------------------|--------|--------|---------|--------|--------|--------|
| INCOME                                 |   |   |    |   |   |   |
| Rental                                 |   | $      | 177,340 |   |   | $      | 155,595 |   |
| Coin                                   |   |   | 2,561   |   |   |   | 2,743 |   |
| Interest - Reserve                     |   |   | 1,724   |   |   |   | 976 |   |
| Interest – Escrow                |   |   | 498     |   |   |   | 268 |   |
| Late charges                           |   |   | 265     |   |   |   | 328 |   |
| Security deposits forfeited            |   |   | 20      |   |   |   | - |   |
| Miscellaneous                          |   |   | 524     |   |   |   | 925 |   |
| TOTAL INCOME                           |   |   | 182,932 |   |   |   | 160,835 |   |
|                                   |   |   |    |   |   |   |   |   |
| OPERATING EXPENSES                     |   |   |    |   |   |   |   |   |
| Maintenance and repairs payroll        |   |   | 13,680  |   |   |   | 13,072 |   |
| Maintenance and repairs supplies       |   |   | 1,808   |   |   |   | 2,025 |   |
| Maintenance and repairs contract       |   |   | 2,909   |   |   |   | 2,315 |   |
| Maintenance and repairs - Reserve      |   |   | 1,250   |   |   |   | 380 |   |
| Painting and decorating                |   |   | 1,358   |   |   |   | 890 |   |
| Snow removal                           |   |   | 1,823   |   |   |   | 3,275 |   |
| Grounds maintenance                    |   |   | 112     |   |   |   | 262 |   |
| Services/exterminating                 |   |   | -       |   |   |   | 1,401 |   |
| Furniture replacement                  |   |   | -       |   |   |   | 162 |   |
| Electricity                            |   |   | 6,298   |   |   |   | 5,708 |   |
| Water                                  |   |   | 7,194   |   |   |   | 7,774 |   |
| Sewer                                  |   |   | 7,194   |   |   |   | 8,272 |   |
| Gas                                    |   |   | 7,013   |   |   |   | 7,488 |   |
| Trash removal                          |   |   | 3,022   |   |   |   | 2,820 |   |
| Management fee                         |   |   | 18,150  |   |   |   | 10,880 |   |
| Accounting                             |   |   | 3,400   |   |   |   | 3,200 |   |
| Legal                                  |   |   | 382     |   |   |   | 678 |   |
| Advertising                            |   |   | 139     |   |   |   | 71 |   |
| Telephone                              |   |   | 1,683   |   |   |   | 1,224 |   |
| Office supplies/copies                 |   |   | 1,428   |   |   |   | 656 |   |
| Training                               |   |   |    |   |   |   | 423 |   |
| Employee benefits and health insurance |   |   | 1,192   |   |   |   | 1,172 |   |
| Payroll taxes                          |   |   | 3,730   |   |   |   | 3,809 |   |
| Workers' compensation                  |   |   | 739     |   |   |   | 663 |   |
| Bad debt                               |   |   | 2,469   |   |   |   | 1,045 |   |
| Other administrative                   |   |   | 215     |   |   |   | 459 |   |
| Real estate taxes                      |   |   | 46,890  |   |   |   | 45,834 |   |
| DHCR monitoring fee                    |   |   | 1,366   |   |   |   | 1,327 |   |
| Property and liability insurance       |   |   | 7,241   |   |   |   | 7,182 |   |
| Asset management fee                   |   |   | 273     |   |   |   | - |   |
| Interest                               |   |   | 19,364  |   |   |   | 17,646 |   |
| Depreciation                           |   |   | 35,582  |   |   |   | 40,411 |   |
| TOTAL OPERATING EXPENSES               |   |   | 197,904 |   |   |   | 192,524 |   |
|                                   |   |   |    |   |   |   |   |   |
| NET LOSS                               |   | $      | (14,972 | )      |   | $      | (31,689 | ) |

|                                  |   | 2006   |    |   | 2005   |   |
|---------------------------------------|--------|--------|---------|--------|--------|--------|
|                                  |   |   |    |   |   |   |   |   |
| PARTNERS' CAPITAL - BEGINNING OF YEAR |   | $      | 92,834  |   |   | $      | 125,979 |   |
|                                  |   |   |    |   |   |   |   |   |
| Net loss                              |   |   | (14,972 | )      |   |   | (31,689 | ) |
|                                  |   |   |    |   |   |   |   |   |
| Distributions                         |   |   | -       |   |   |   | (1,456 | )  |
|                                  |   |   |    |   |   |   |   |   |
| PARTNERS' CAPITAL - END OF YEAR       |   | $      | 77,862  |   |   | $      | 92,834 |   |

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|                                                                            |   | 2006   |    |   | 2005   |   |
|---------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| CASH FLOWS FROM OPERATING ACTIVITIES                                            |   |   |    |   |   |   |
| Net loss                                                                        |   | $      | (14,972 | )      |   | $      | (31,689 | ) |
| Adjustments to reconcile net loss to net cash provided by operating activities: |   |   |    |   |   |   |   |   |
| Depreciation                                                                    |   |   | 35,582  |   |   |   | 40,411 |   |
| (Increase) decrease in:                                                         |   |   |    |   |   |   |   |   |
| Subsidy receivable                                                              |   |   | 3,447   |   |   |   | 356 |   |
| Rent receivable                                                                 |   |   | (838    | )      |   |   | (30 | ) |
| Miscellaneous receivables                                                       |   |   | 75      |   |   |   | (50 | ) |
| Prepaid expenses                                                                |   |   | (21     | )      |   |   | (302 | ) |
| Taxes and insurance escrow                                                      |   |   | (3,392  | )      |   |   | 6,490 |   |
| Increase (decrease) in:                                                         |   |   |    |   |   |   |   |   |
| Accrued expenses                                                                |   |   | (1,627  | )      |   |   |   |   |
| Accounts payable                                                                |   |   | (384    | )      |   |   | (582 | ) |
| Deferred rent                                                                   |   |   | (27     | )      |   |   | 22 |   |
|                                                                            |   |   |    |   |   |   |   |   |
| NET CASH PROVIDED BY OPERATING ACTIVITIES                                       |   |   | 19,470  |   |   |   | 12,999 |   |
|                                                                            |   |   |    |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                            |   |   |    |   |   |   |   |   |
| Purchases of property and equipment                                             |   |   | (7,931  | )      |   |   | (10,983 | ) |
| Deposits to and interest earned on replacement reserve                          |   |   | (12,668 | )      |   |   | (12,071 | ) |
| Withdrawals from replacement reserve                                            |   |   | 13,979  |   |   |   | 19,563 |   |
|                                                                            |   |   |    |   |   |   |   |   |
| NET CASH USED IN INVESTING ACTIVITIES                                           |   |   | (6,620  | )      |   |   | (3,491 | ) |
|                                                                            |   |   |    |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                            |   |   |    |   |   |   |   |   |
| Principal payments on mortgage payable                                          |   |   | (3,741  | )      |   |   | (3,499 | ) |
| Payments of developers' fee payable                                             |   |   | -       |   |   |   | (3,344 | )  |
| Partners' distributions                                                         |   |   | -       |   |   |   | )1,456 | )  |
|                                                                            |   |   |    |   |   |   |   |   |
| NET CASH USED IN FINANCING ACTIVITIES                                           |   |   | (3,741  | )      |   |   | (8,299 | ) |
|                                                                            |   |   |    |   |   |   |   |   |
| NET INCREASE IN CASH                                                            |   |   | 9,109   |   |   |   | 1,209 |   |
|                                                                            |   |   |    |   |   |   |   |   |
| CASH - BEGINNING OF YEAR                                                        |   |   | 1,388   |   |   |   | 179 |   |
|                                                                            |   |   |    |   |   |   |   |   |
| CASH - END OF YEAR                                                              |   | $      | 10,497  |   |   | $      | 1,388 |   |

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| Rent receivable                                |   | $      | 4,679  |   |
|------------------------------------------------|--------|--------|--------|--------|
| Miscellaneous receivables                      |   |   | 273    |   |
|                                           |   |   |   |   |
| Total Accounts Receivable at December 31, 2006 |   | $      | 4,952  |   |

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| Grounds maintenance                         |   | $      | 52    |   |
|---------------------------------------------|--------|--------|-------|--------|
| Telephone                                   |   |   | 10    |   |
| Maintenance and repairs supplies            |   |   | 21    |   |
| Water                                       |   |   | 638   |   |
| Sewer                                       |   |   | 638   |   |
| Electric                                    |   |   | 772   |   |
| Gas                                         |   |   | 579   |   |
| Total Accounts Payable at December 31, 2006 |   | $      | 2,710 |   |

| 2007            |   | $      | 4,002   |   |
|-----------------|--------|--------|---------|--------|
| 2008            |   |   | 4,281   |   |
| 2009            |   |   | 4,579   |   |
| 2010            |   |   | 4,898   |   |
| 2011            |   |   | 5,238   |   |
| Thereafter      |   |   | 848,091 |   |
|            |   |   |    |   |
| Total Mortgages |   | $      | 871,089 |   |

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| Short-term portion |   | $      | 4,002   |   |
|--------------------|--------|--------|---------|--------|
| Long-term portion  |   |   | 867,087 |   |
|               |   |   |    |   |
| Total Mortgages    |   | $      | 871,089 |   |

| David R. Bacon                        | General Partner         | .005%  |
|---------------------------------------|-------------------------|--------|
| Frank Salvatore, Jr.                  | General Partner         | .005%  |
| WNC Housing Tax Credit Fund, IV, L.P. | Limited Partner         | 99.98% |
| WNC Housing, L.P.                     | Special Limited Partner | .01%   |

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|                                  |   | 2006   |   |   |   | 200    |   |
|---------------------------------------|--------|--------|--------|--------|--------|--------|--------|
| Payroll, payroll taxes & benefits |   | $      | 19,341 |   |   | $      | 18,716 |   |
| Management fee                        |   |   | 18,150 |   |   |   | 10,880 |   |
|                                  |   |   |   |   |   |   |   |   |
|                                  |   | $      | 37,491 |   |   | $      | 29,596 |   |

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